Dongguan Securities·2026-01-28 07:35Investment Rating - The report maintains an "Overweight" investment rating for the industry, indicating an expectation that the industry index will outperform the market index by over 10% in the next six months [1][61]. Core Insights - The main factors that previously suppressed the rise of China's duty-free industry have been reversed, marking a turning point for the sector. The report highlights that the decline in the duty-free market was influenced by multiple factors, including increased competition from high commission models in Japan and South Korea during the pandemic, fluctuations in domestic household income expectations, and supply constraints in duty-free shopping locations [4][12]. - High-end retail consumption remains strong, with a recovery in consumer confidence leading to a resurgence in tourism retail. The report notes that since 2023, policies aimed at stimulating consumption have been effective, with consumer sentiment gradually improving, particularly among middle to high-income households [4][16]. - The expansion of port and city duty-free shops is expected to benefit from the growth in inbound and outbound tourism, supported by policy changes and increased international travel. The report mentions that new duty-free shops will be established at 41 ports, enhancing market scale [4][28]. - The duty-free market in Hainan is experiencing a rebound due to favorable policies and the lifting of restrictions, with significant increases in shopping amounts and visitor numbers reported [4][56]. Summary by Sections Review of Duty-Free Trends - The report reviews the trends in the duty-free industry, noting that the factors suppressing growth have been addressed, and a turning point is anticipated. The analysis indicates that the competitive landscape is normalizing post-pandemic, with improved consumer sentiment and policy support [4][12]. High-End Retail Recovery - Consumer willingness to spend and expectations for future income have shown steady improvement since the "924" policy implementation. The report emphasizes that high-end retail channels, including duty-free, are likely to recover faster than mass-market consumption due to their reliance on income expectations [4][19]. Port and City Duty-Free - The report highlights the ongoing recovery in inbound and outbound tourism, with significant growth in the number of travelers. The introduction of new bidding models for duty-free operations at major airports aims to enhance competition and market size [4][32][39]. Hainan Duty-Free - The Hainan duty-free market is benefiting from new policies that expand the range of products available and improve the shopping experience for consumers. The report cites substantial growth in sales and visitor numbers following the implementation of these policies [4][56]. Investment Strategy - The report maintains an "Overweight" rating for the industry, citing improved competitive pressures and a favorable economic environment that enhances consumer confidence. The anticipated expansion of the duty-free market is expected to lead to sustained growth in the sector [4][61].