2025-11-24 01:46Summary of Conference Call Notes Industry Overview - Industry: China Duty-Free Sector - Event: Announcement of duty-free tender rules by Shanghai International Airport (SIA) for Shanghai Pudong International Airport (PVG) and Shanghai Hongqiao International Airport (SHA) [2][3] Key Points 1. Tender Structure: The tender consists of three sections: - Section 1: T1 and S1 of PVG - Section 2: T2 and S2 of PVG - Section 3: T1 of SHA - Sections 1 and 2 cannot be operated by the same duty-free operator [2][3] 2. Eligibility for Bidders: Bidders must be licensed domestic duty-free operators or foreign-funded duty-free operators [2][3] 3. Operational Term: The term of operation for the winning bidders is from January 1, 2026, to December 31, 2033 [2][3] 4. Market Dynamics: - Prior to this tender, the duty-free sector was only accessible to Chinese companies, with CTG holding 80% of the domestic market share [3] - CTG's leading position is attributed to its operations in major airports in Shanghai, Beijing, Guangzhou, and Hainan [3] 5. Impact on CTG: - If foreign or other domestic operators win the bid, Sunrise Duty Free (a subsidiary of CTG) may lose nearly 50% of its duty-free sales at PVG [3] - Duty-free sales at PVG are expected to recover to only 40% of the 2019 level, estimated at cRmb6 billion, contributing a profit of up to Rmb200 million to CTG [3] 6. Potential Benefits of Foreign Operators: - The entry of foreign duty-free operators could enhance the product mix at Chinese airports, particularly in luxury goods, which are currently underrepresented [4] - This could lead to increased per capita spending and faster recovery in duty-free rental income as international passenger volume continues to grow [4] Additional Considerations - Risks: The sector faces several downside risks, including: - Continued economic sluggishness - Slower-than-expected growth in peak season tourist traffic - Adverse weather conditions affecting travel - Natural disasters such as earthquakes and epidemics [6] - Market Gap: There is a noticeable gap in procurement capabilities and spending power between CTG and globally leading duty-free operators like Dufry and DFS [3][4] This summary encapsulates the critical insights from the conference call regarding the developments in the China duty-free sector, particularly focusing on the implications of the new tender rules and the competitive landscape.