From August 1st to 12:00 on the 6th, Hainan reported a total of 646 local infections. Sanya City has implemented temporary static management since 6:00 on the 6th.
Affected by this, China’s CDFG has fallen continuously in recent days, from 225 yuan to 195 yuan. However, the epidemic will always pass. As the rigid consumption of the high-income class, CDFG has a strong scarcity and anti-risk ability, which is different from other consumer goods.
Therefore, this time the black swan may have formed a gold pit.
01
Bad first half
CDFG’s poor performance in the first half of the year was expected.
According to the semi-annual performance report, the operating income in the first half of the year was 27.65 billion, a year-on-year decrease of 22.2%, and the gross profit margin increased by 5.5pct to 34.0%. The net profit attributable to the parent was 3.94 billion, a year-on-year decrease of 26.5%; the net profit after deducting non-attributable to the parent was 3.93 billion, a year-on-year decrease of 25.4%.
In the second quarter, the operating income was 10.87 billion yuan, a year-on-year decrease of 37.5%; the net profit attributable to the parent was 1.37 billion yuan, a year-on-year decrease of 45.2%.
The decline in performance was mainly affected by the spread of the domestic epidemic. In the first half of the year, the number of outlying islands at Hainan Airport decreased by 37%, and the passenger flow of the company’s duty-free stores fell sharply year-on-year; the logistics network in Shanghai was temporarily closed for 39 days.
In June, the company’s sales increased significantly month-on-month, and the month’s revenue increased by 13% year-on-year; Hainan’s single-day sales exceeded 200 million on June 10, which was a dazzling performance.
02
The stock price did not reflect the increment
Looking at it now, the core competitiveness of CDFG remains unchanged.
Among the 10 duty-free shops in operation in Hainan, CDFG owns 6.
In addition, the company’s Haikou International Duty Free City is expected to open before the National Day in 2022, with a construction area of 289,000 square meters. The planned land area of the first phase and No. 2 of the Sanya store under construction is 110,000 square meters, and the second phase of the duty-free French garden will continue to be promoted at the Phoenix Airport. Construction of the complex and the third-phase tax-free project.
In addition, in July 2022, the duty-free shopping policy for Cambodians was launched, and duty-free goods can be purchased in the three duty-free shops in Cambodia and China, which is expected to bring new growth.
At present, CDFG’s business is concentrated in domestic airports and outlying islands, and there is still much room for improvement in its international business layout. Referring to the shopping policy of Cambodians, the international market space is relatively broad.
In general, CDFG has several advantages: the new seaport project, the regional dividend of the free trade port, and internationalization, but the market has not responded at all, which is a poor expectation.
In particular, Haikou International Duty Free City will open in two months, and will greatly change the size of China Duty Free, which is expected to shape the second growth curve, but the stock price does not reflect this information at all.
03
The most definite track for recovery
Judging from Sanya’s practice, the hotel can provide stranded tourists with half-price discounted renewal services. Tourists can complete the 7-day risk investigation and can leave the island after evaluation. It can be seen that Sanya’s ideas are still very open-minded, which is also a major reason for its popularity.
Tourism and shopping in Hainan have considerable independence and are not affected by the economic environment. To put it simply, the people who come here are rich people (and purchasing agents), and their spending power and willingness are extremely strong.
In addition, it is inconvenient to go abroad now, and it is even more to get together in Hainan. Therefore, the passenger flow in Hainan has always been very good. The epidemic situation in the short term has basically no impact on this general trend.
Therefore, the duty-free industry has the clearest recovery segment in the entire consumer industry.
From the perspective of valuation, the current valuation of CDFG, corresponding to 2023, is probably at the median level of valuation in the past five years. If next year is a strong recovery, its valuation level will be even lower. Therefore, there is a margin of safety.
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