Core Viewpoint - The target price for China Duty Free Group (601888)(01880) has been raised by 50% from HKD 60 to HKD 90, reflecting stronger profit growth momentum supported by favorable policies and better growth prospects. The rating remains "Outperform" [1] Group 1: Financial Performance - For Q3 2025, the net profit of China Duty Free Group decreased by 29% year-on-year to RMB 4.52 billion, which was below both the firm's and market expectations [1] - Sales decline has narrowed compared to the previous quarter, with gross margin stabilizing around 32%-33% [1] - The company is expected to gradually improve operations in the future, with gross margins likely to remain stable due to optimized product and merchandise mix [1] Group 2: Cost and Profitability - Due to business expansion, there is an anticipated increase in sales and marketing, rental, and personnel costs, leading to a slower improvement in operating profit margins [1] Group 3: Policy Impact - China has implemented several new duty-free policies aimed at boosting domestic consumption, enhancing tourism in Hainan Province, and expanding shopping channels for domestic and international consumers [1] - Preliminary data from Hainan Province indicates a positive response to these policies, suggesting that the company, as a leading duty-free retailer in the region, will be one of the main beneficiaries [1]

Investment Rating - The report assigns a "Trading Buy" rating for the company, indicating a potential upside of 5% to 15% from the current price [6][9]. Core Insights - The company reported a revenue of RMB 39.86 billion for the first three quarters of 2025, a year-on-year decline of 7.3%, with a net profit attributable to shareholders of RMB 3.05 billion, down 22% year-on-year [7][9]. - The third quarter saw revenue of RMB 11.7 billion, remaining flat year-on-year, but the net profit dropped by 29% to RMB 450 million, falling short of expectations [7][9]. - The company announced a cash dividend of RMB 0.25 per share [7]. Summary by Sections Company Overview - The company operates in the leisure services industry, with an A-share price of RMB 76.07 as of October 31, 2025, and a market capitalization of RMB 148.53 billion [2]. Recent Ratings - The company has seen various ratings over the past year, including "Buy" and "Trading Buy," with the most recent rating being "Trading Buy" on January 17, 2025 [3][6]. Financial Performance - The gross profit margin for the first three quarters decreased by 0.58 percentage points to 32.54%, while the third quarter margin remained stable at 32% [9]. - The company expects revenue to recover in the fourth quarter, driven by increased sales during the National Day and Mid-Autumn Festival, with daily sales in Hainan reaching RMB 940 million, a 5% year-on-year increase [9]. Future Projections - The report revises profit forecasts downward, expecting net profits of RMB 3.72 billion, RMB 3.89 billion, and RMB 4.27 billion for 2025, 2026, and 2027 respectively, with corresponding EPS of RMB 1.80, RMB 1.88, and RMB 2.06 [9][11].