Summary of Conference Call Notes Industry and Company Involved - **Industry**: Duty-Free Retail and Airport Operations - **Companies**: Shanghai International Airport (SIAC) and China Tourism Group Duty Free (CTGDF) Key Points and Arguments Shanghai Airport Duty-Free Store (DFS) Tender Results - The tender results for the DFS concessions at Pudong and Hongqiao Airports were announced, with Avolta winning the concession for Pudong Airport Terminal 1 and Satellite Hall 1, while CTGDF won for Terminal 2, Satellite Hall 2, and Hongqiao Airport Terminal 1 [2][5] - The new rental payment structure will consist of a fixed fee and a lower revenue-sharing fee, effective from January 1, 2026, to December 31, 2033, with a mid-term review [2][5] Impact on Shanghai Airport - The new rental fee model, which includes a minimum/fixed rental fee and a lower average revenue share of 13% (down from 23%), is seen as negative for Shanghai Airport, indicating management's reduced confidence in potential DFS sales growth [2][5][6] - Estimated total reduction in DFS rental revenue for Shanghai Airport is projected to be Rmb400 million from 2026 to 2033, with a total earnings reduction of Rmb1.7 billion during the same period [2][7][9] - The minimum rental fee will remain largely unchanged at Rmb700 million per annum [2][6] Market Expectations and Analyst Ratings - The tender results missed market expectations, which anticipated higher rental fees due to increased competition and higher revenue-sharing rates [5][6] - Analysts maintain a **Sell** rating on Shanghai Airport due to these developments and the overall bearish outlook on DFS spending per passenger [5][15] Impact on China Tourism Group Duty Free (CTGDF) - CTGDF will operate only half of the DFS store space at Pudong Airport starting in 2026, leading to an estimated 5% negative revenue impact in the next 2-3 years [5][11] - Despite the reduced space, CTGDF will benefit from a higher earnings share (100% vs. 51% previously) from the stores it operates, which may mitigate the overall earnings impact [5][11] - Analysts maintain a **Neutral** rating on CTGDF, citing stretched valuations and several headwinds, including weak consumer sentiment and competition from online platforms [12][14] Financial Projections - The average revenue-sharing rate for Pudong is estimated at 13%, while for Hongqiao it is 12% [6][9] - Projected DFS sales at Shanghai airports are expected to increase slightly in 2026 but decline thereafter, with total DFS sales at Rmb6,466 million in 2026 and Rmb6,986 million in 2027 [9][11] Risks and Considerations - Key upside risks for CTGDF include potential policy stimulus for consumption and the new downtown DFS policy effective from October 1, 2024, which may drive more sales [12][14] - Key downside risks include intensified price competition from e-commerce platforms and weakening demand for luxury products [14] Other Important Content - The new tenancy model includes a review one year ahead of Phase 2 to decide on contract continuation or termination [8] - The financial impact of the tenancy change is detailed in various exhibits, showing a clear comparison between old and new contract terms [9][11] This summary encapsulates the critical insights from the conference call, focusing on the implications for Shanghai Airport and CTGDF, as well as the broader market context.

Summary of Key Points from the Conference Call on China's Inbound Tourism Industry Overview - The focus is on China's tourism industry, particularly the growth potential of inbound tourism, which is currently dominated by domestic and outbound demand but is expected to become a significant earnings driver in the next three years [1][4][63]. Core Insights and Arguments - **Inbound Tourism Growth**: Inbound tourism is projected to increase from 11% of China's tourism revenue to 18% within five years, with hotels expected to see the highest revenue exposure, reaching over 20% on average by 2030 [4][77]. - **Service Exports Performance**: China's service exports grew by 14% in the first eight months of 2025, with tourism service exports surging by 56% year-on-year, recovering to 150% of pre-COVID levels [3][39]. - **Infrastructure and Policy Support**: Investments in infrastructure, clean energy, and cultural experiences are enhancing the attractiveness of China as a leisure travel destination. The introduction of the K1 visa aims to attract young talent, further boosting business travel [2][19]. - **Market Dynamics**: The report highlights that low-tier cities are becoming increasingly attractive for inbound tourists, with cities like Hangzhou showing robust growth in inbound tourist numbers [3][4]. Financial Projections - **Revenue Exposure**: Hotels are expected to have the highest revenue exposure to inbound tourism, while OTAs, airlines, and duty-free sectors are projected to see 5-10% revenue exposure in five years [4][78]. - **Earnings Growth**: The report anticipates a 19% compound annual growth rate (CAGR) in inbound tourism spending in USD terms over the next decade, driven by increased visitation and longer stays [39][84]. Key Beneficiaries - **Top Stock Picks**: The report identifies ten stocks that could benefit from the growth in inbound tourism, with Trip.com (TCOM.O) ranked as the most attractive, followed by Air China (0753.HK), Shanghai Airport (600009.SS), and CTG Duty-Free (1880.HK) [5][11][70]. - **Segment Analysis**: OTAs are seen as key enablers for inbound tourism, with Trip.com positioned to benefit significantly due to its international operations [57][90]. Additional Insights - **Healthcare and Shopping**: The inbound healthcare sector is expanding, with significant demand for premium medical services. The retail sector is also experiencing growth, driven by rising consumer demand for premium goods and duty-free shopping [61][60]. - **Government Initiatives**: Recent government measures aim to support service consumption, with inbound travel identified as a key growth driver for the economy [12][25]. - **Challenges and Opportunities**: Despite trade frictions, China's economic ties with emerging markets are strengthening, presenting growth opportunities for inbound travel [25][30]. Conclusion - The outlook for China's inbound tourism is positive, with significant growth expected in the coming years. Key sectors such as hotels, OTAs, and airlines are poised to benefit from this trend, supported by government initiatives and changing consumer preferences.