Investment Rating - The report assigns a "Buy" rating for China Tourism Group Duty Free Corp (CTGDF) [4] Core Insights - Encouraging sales trends have emerged since the new duty-free policy took effect on November 1, with Hainan offshore duty-free sales increasing by 34.86% year-on-year during the first week of November [1][2] - The online platform in Hainan saw a significant growth in Gross Merchandise Value (GMV) of 40.4% during the Double 11 shopping festival, indicating a positive shift in consumer behavior [1][2] - The number of buyers has shown positive growth, particularly in categories such as mobile phones and gold accessories, suggesting a recovery in consumer spending [2] - Management expresses confidence in peak season performance, supported by new policies, marketing campaigns, and concert events in Hainan [2] Sales Performance - Hainan offshore duty-free sales reached Rmb506 million during the first week of November, with a notable increase in per capita spending by 30.5% year-on-year [2] - Daily sales exceeded Rmb100 million on November 11, indicating strong consumer engagement during the shopping festival [2] - The growth in sales is attributed to a combination of new policies, a wealth effect, and a low base from the previous year [1] Pricing Strategy - The company has adopted a less aggressive pricing discount strategy this year, focusing on balancing gross profit margin (GPM) and sales [2] - Over 200 popular cosmetics SKUs are offered weekly, with 80% having a price advantage compared to competitors [2] Category Performance - The cosmetics category has shown recovery, with positive growth since Q3 2025, while luxury goods performance remains mixed [3] - The watch category has lagged, whereas gold & jewelry and boutique categories have experienced growth [3] Valuation - The DCF-based target price for CTGDF is set at Rmb78, reflecting the long-term structural growth potential of its duty-free business [6]

Summary of China Tourism Group Duty Free Corp. Conference Call Company Overview - **Company Name**: China Tourism Group Duty Free Corp. (CTGDF) - **Ticker**: 601888.SS (A-shares), 1880.HK (H-shares) - **Market Position**: Largest travel retail operator globally with approximately 80% market share in China's duty-free industry [26][27] Key Industry Insights - **Favorable Duty-Free Policies**: New policies effective from November 1, 2025, aim to boost consumption and recapture overseas spending onshore. Key measures include: - Tax refund/exemption for domestic products - Expansion of product categories in duty-free stores - Support for online reservations and pick-up services at duty-free stores [2][9][11] - **Hainan Free Trade Port**: Expected to enhance growth prospects starting December 18, 2025, with independent customs operations and favorable policies [2][9] Financial Performance - **3Q25 Results**: - Revenue showed a sequential improvement with a year-over-year decline narrowing to -0.4% - Earnings decreased by 29% year-over-year primarily due to lower gross margins and increased SG&A expenses [1] - Gross Profit Margin (GPM) slightly declined to 29.8% due to a higher sales mix of lower-margin mobile phones [3] - **Sales Trends**: - Hainan offshore duty-free sales increased by 3.4% in September and 13.6% during the Golden Week (October 1-8) [1] - Anticipated positive growth trajectory into the peak season due to improved execution and recovery in outbound travel [1] Strategic Initiatives - **Margin Improvement**: Management aims to enhance margins through product mix optimization, store efficiency improvements, and cost reductions [3] - **Inventory Management**: Increased inventory levels in 3Q25 to prepare for the peak season, particularly in cosmetics, while maintaining healthy inventory levels [3] Shareholder Returns - **Dividend Announcement**: The company declared its first interim dividend of RMB 517 million, representing a 17% payout ratio based on 9M25 net profit, with plans to maintain a high payout ratio [1] Valuation and Recommendations - **Target Price**: DCF-based target price set at RMB 78.00, reflecting the long-term growth potential of the duty-free business [28] - **Investment Rating**: Buy rating maintained for CTGDF, supported by structural growth in the duty-free industry and expected benefits from favorable policies and market dynamics [27] Additional Insights - **Product Diversification**: The expansion of product categories in duty-free stores is expected to cater to varying consumer preferences and enhance sales [2][11] - **Operational Efficiency**: Focus on digitalization and cost control measures to improve overall operational efficiency and profitability [3] This summary encapsulates the critical insights and financial performance of China Tourism Group Duty Free Corp. as discussed in the conference call, highlighting the company's strategic initiatives and market outlook.