China International Travel Service (601888): Proposed to win the bid of Daxing Airport Duty Free Shop to improve the certainty of long-term performance

China International Travel Service (601888): Proposed to win the bid of Daxing Airport Duty Free Shop to improve the certainty of long-term performance

Event: China General Tendering Network announced on March 8, 2019 that China Exemption Group, a subsidiary of China National Tourism Administration, was selected as the first candidate in the two bidding sections of Daxing Airport for tobacco, alcohol, food, aroma, and quality.On March 11, 2011, there was no objection before the termination period, and China Exemption Group most likely won the 10-year tax-free business right of Daxing Airport.

The bidding price of the China Exempted Group is the bidding 北京夜网 section for tobacco, alcohol and food.

3 billion annual guaranteed operating expenses and 49% deduction point.

1.6 billion annual guaranteed operating expenses and 46% deduction.

With a relatively low deduction point of 49% for tobacco and alcohol and 46% for Xianghua, China Exemption Group was selected as the first candidate for tax-free in Daxing Airport, highlighting the comprehensive competitiveness of “technology + finance”.

The tax-free bidding for Daxing Airport adopts the invitation bidding system. Participating companies include China Exemption, Shenzhen Exemption, Pearl Exemption, and Medium Delivery.

Among them, the highest deduction point of 49% for tobacco and alcohol labels comes from China Exemption, and the highest deduction point of 49% for fragrance and alcohol labels comes from Pearl Exemption. Based on the comprehensive advantage of “technology + finance”, China Exemption won the first bid of the two awards of tobacco, alcohol and fragranceCandidate, tobacco and alcohol labelled 2.

The annual operating guarantee of 3 billion yuan and a deduction point of 49%, Xianghua nominal 4.

The 1.6 billion annual guaranteed operating fee and 46% deduction point, the fragrance deduction point is lower than 49% of the Zhuhai exemption, and it is also lower than 47 of the T2 section of the Capital Airport that won the bid for the exemption.

5%.

Daxing Airport was put into operation before the end of September 2019. Target passengers exploded by 45 million in 2021. It is expected that more than 10 million passengers will explode by that time.

According to the two development goals of Beijing’s one city, Daxing Airport will achieve the passenger explosion target of 45 million and 72 million passengers in 2021 and 2025, respectively. Considering the gradual transfer of China Eastern Airlines and China Southern Airlines to Daxing, Air China still mainly landed in the capital, soThe impact of the diversion of inbound and outbound passengers at the Capital Airport is not significant.

With reference to about one-quarter of the passengers entering and leaving the Capital Airport, assume that the number of passengers entering and leaving Daxing Airport is 22.

5%, then the number of inbound and outbound passengers in 2021 and 2025 is expected to exceed 10 million and 15 million, which will contribute to the tax-free market potential consumer customers.

Compared with the explosion of nearly 30 million inbound and outbound passengers at the Capital Airport and nearly 8 billion tax-free amounts, it is estimated that Daxing Airport is expected to achieve tax exemptions of 2-25 billion in 2021 and contribute over 100 million net profits.

According to the guaranteed sales level, the tobacco and alcohol / fragrance tax exemption of Daxing Airport was realized separately.

7/9.

0 billion US dollars, if the gross margin of tobacco / alcohol / fragrance is 65% / 60% respectively, assuming other expense ratios of 8.

5%, hypertension rate of 25%, then tobacco / alcohol / fragrance respectively achieved 0.

26/0.

Net profit of 3.7 billion, with a net interest rate of 5.

6% / 4.

1%.

China Exempt Group has a market share of 86%, occupying mainstream airport channels, and improving long-term performance certainty.

The annual tax-free market size in 2018 was 39.5 billion yuan, an increase of 27.

At 3%, we estimate that China Exemption Group will surpass 34 billion with a market share of 86%.

The China Exemption has successively won the bids for Guangzhou Baiyun, Hong Kong (Tobacco and Wine), Beijing Capital, Shanghai Pudong and Hongqiao Airports, and the latest bid for Beijing Daxing Airport. Although the overall guaranteed operating fee and deduction rate have improved, the tax-free channel layout of mainstream domestic airportsIt is exempted from locking up large-scale channels for years of tax-free business rights, which is expected to continue to benefit from the return of overseas consumption and continue to improve the certainty of long-term performance.

Earnings forecast and investment advice: We expect the company to return to its parent net profit for 31/19/2031.

5/42.

3/52.

900 million, a growth rate of 24% / 34% / 25%, CAGR is 28%, currently overcome the corresponding 18/19/20 PE is 37/27/22 times.

The proposed bid for Daxing Airport brings potential performance growth to the company, highlights the company’s comprehensive competitiveness under the trend of tax-free marketization, considers the high potential of city stores and Daxing stores, and maintains a “buy” rating.

Risk reminder: the risk of changes in tax exemption policies, the risk of intensified market competition, the risk that the city’s tax exemption policies fall short of expectations, the risk of exchange rate changes, the risk of future performance downwards, and the risk that Daxing Airport will not win the bid.