China National Travel Service (601888) Commentary Report: Deletion of Travel Agency’s Focus on Tax Exemption Benefits Attempts to Open Up Growth Space

Event: On August 31, China National Travel Service released its 2019 semi-annual report. The report stated that the company achieved total operating income of 235.

27 ppm, an increase of 15 in ten years.

46%; net profit attributable to mother 32.

79 trillion, an increase of 70 in ten years.

87%; net profit attributable to non-attributed mothers was 25.

00 ppm, an increase of 30 in ten years.


Realize profit 1.

68 yuan, after deducting non-budgeted revenue 1.

28 yuan.

Investment points: In January 2019, the company transferred 100% of the equity of the China Travel Service to the controlling shareholder. The travel agency business will no longer be consolidated from February.

The company’s tourism services revenue in 2018 was 122.

9 trillion, accounting for 26% of total revenue, with a gross profit margin of 10.


Reported that the information tourism service business income was 5.

9.9 billion.

After the divestiture of the travel agency business, the company’s operating income has increased initially and its gross profit margin will increase significantly.

As the travel agency business is an asset-heavy, labor-intensive, low-margin, low-growth business, from the perspective of financial indicators, the alternative travel agency business is beneficial to the improvement of the company’s financial indicators.

From an operational perspective, focusing on tax-exempt business and seizing the changes in the era of consumption upgrades and consumer refunds will promote the company’s further development.

The report states that the company’s sales of duty-free goods achieved operating income of 229.

08 million yuan, an increase of 53 in ten years.


In terms of channels, Shanghai and Shanghai achieved tax-free income73.

77 ppm, an increase of 92 in ten years.

41% (consolidated from March 2018); Capital Airport realized tax-free income43.

65 ppm, an increase of 25 in ten years.

54%; Sanya Duty Free Shop realized tax free income51.

810,000 yuan, an increase of 28 in ten years.


The company will invest 128.

The first phase of the construction of the Haikou International Duty-Free City Project of 600 million US dollars, including the first phase of a tax-free commercial complex, apartments and residential buildings, will be completed in 2022.

This investment scale budget, but because of the phased expenditure, rolling development, and real estate projects are expected to quickly withdraw funds, the overall funding pressure is less.

In 2018, Haikou / Sanya ‘s tax-free income accounted for 7% / 15% of the total tourism revenue. After the project is completed, it is expected that the scale of Haikou ‘s outlying islands ‘tax-free income will improve.

The bidding policy for outbound stores has little impact on the company.

The “Interim Measures for the Administration of Port Duty Free Shops” released at the beginning of July broke the ownership division of China Duty Free ‘s outlet shops. However, from the content of the temporary method, the scale of bidding scores is beneficial to China Duty Free companies with excellent operating capabilities.

The contract for the exit of Beishangguang Airport will initially expire in 2025, and there is no need to change the impact of the new method on the company’s performance in the short term.

And the company won the bid for 厦门夜网 Beijing Daxing Airport’s tax-free business in March, with a comprehensive deduction rate close to that of Capital Airport, and the contract period is ten years.

According to the latest Moddie Davitt report, in 2018 the global travel retailer ranked fourth in the rankings, up four places after Dufry, Rakuten and Silla.The company’s tax-exempt business has developed steadily, and its proportion in the domestic tax-exempt market has continued to increase.

Duty-free shops in Beijing, Dalian, Qingdao, Xiamen, and Shanghai for overseas tourists have been opened one after another. Among them, Shanghai shops are expected to open for domestic shop bookings and airport payment pickup services. The city shop policies are expected to make breakthroughs, bringingThe increase in competition revenue has significantly improved the company’s performance.

The company vigorously promotes international expansion, and the territory of tax-free business is expected to continue to expand.

The company’s EPS is expected to be 2 in 2019 and 2020, respectively.


61 yuan, corresponding to 42/37 times the PE, maintaining the “recommended” level.

Risk reminders: 1) International political security situation affects inbound and outbound tourism; 2) RMB exchange rate conversion changes; 3) Hainan outlying island tax-free passenger flow growth is less than expected; 4) Newly opened airport store sales are less than expected.