CTG DUTY-FREE(SH:601888) Bank of China Securities·2025-12-14 05:15Investment Rating - The industry investment rating is "Outperform the Market," indicating that the industry index is expected to perform better than the benchmark index over the next 6-12 months [14]. Core Insights - The recent bidding results for duty-free shops at Shanghai Airport show that China Duty Free Group and Dufry have won the bids, which is expected to enhance competition and operational vitality in the duty-free sector. The rental agreement has been optimized to a base fee plus a low commission model, which is anticipated to encourage duty-free operators to expand sales in port channels and reduce costs, benefiting both operators and the airport [1][3]. - The upcoming closure of Hainan and the continuous policy support across various channels, along with the optimized rental agreements at key ports, present multiple advantages for the duty-free industry. The report suggests focusing on the leading duty-free operator, China Duty Free Group, and notes that Wangfujing, as a state-owned enterprise in Beijing, is also expected to participate in the bidding and expand its port channel business [3]. Summary by Sections Bidding Results - Shanghai Airport announced the candidates for the duty-free shop bids, with Dufry winning the bid for the T1 and S1 satellite hall at Pudong Airport, and China Duty Free Group winning the T2 and S2 satellite hall and the T1 international section at Hongqiao Airport. The monthly fixed fees for the winning bids are 3,141 RMB/m²/month for Dufry, 3,090 RMB/m²/month for China Duty Free Group at Pudong T2, and 2,827 RMB/m²/month for China Duty Free Group at Hongqiao T1, with commission rates ranging from 8% to 24% [5][8]. Competitive Landscape - The introduction of foreign operators is expected to invigorate the duty-free market at ports, breaking the previous exclusive operating model. Dufry, backed by the world's largest travel retailer, is anticipated to enhance competition and operational efficiency in the duty-free sector [5][8]. Financial Implications - The new contracts feature a fixed fee plus a floating commission model, which is expected to lower the commission rates compared to previous agreements. The annual base fees remain stable, with Pudong T1 at 300 million RMB, Pudong T2 at 330 million RMB, and Hongqiao T1 at 70 million RMB. This new structure is likely to encourage duty-free operators to increase sales volume, effectively diluting fixed costs and promoting brand expansion [5][8].