The Surging News reporter Shao Bingyan
The China-China Exemption Hong Kong Stock Exchange IPO is imminent.
On August 9, according to the Hong Kong Stock Exchange, China Tourism Group China Exemption Co., Ltd. (hereinafter referred to as "China China Exemption") passed the listing hearing of the Hong Kong Stock Exchange.
Founded in 1984, China Duty Free (Group) Co., Ltd. (China Duty Free Group), formerly known as China Duty Free Company, is the only state-owned franchise company authorized by the State Council to carry out duty free business nationwide. In 2004, the State Council approved the implementation of a strategic reorganization between China National Travel Service Group and China International Travel Service Corporation to jointly establish China National Travel Service Group Co., Ltd. (the predecessor of China China National Travel Service), becoming the only central enterprise under the State-owned Assets Supervision and Administration Commission of the State Council with tourism and tax exemption as its main business. In October 2009, China's China Central Exemption (601888. SH) is listed on the Main Board of the Shanghai Stock Exchange.
According to the prospectus, China China Exemption is the only retail operator in China that covers all duty-free sales channels, and has developed into the world's largest travel retail operator in the past 40 years. In 2021, China accounted for 24.6% of the global travel retail industry market share.
In terms of performance, in 2019, 2020 and 2021, China's free revenue was 48.013 billion yuan, 52.598 billion yuan and 67.676 billion yuan, and net profit was 5.471 billion yuan, 7.109 billion yuan and 12.441 billion yuan, respectively. From 2019 to 2021, revenue will grow at a CAGR of 18.7% and net profit will grow at a CAGR of 50.8%.
The total revenue in the first half of 2022 was 27.651 billion yuan, down 22.2% year-on-year, and the net profit was 4.552 billion yuan, down 30.4% year-on-year.
Among them, due to the new crown epidemic, affected by international travel restrictions and the shortening of stays in transportation hubs, the revenue of port duty-free shops fell from 31.837 billion yuan in 2019 to 20 billion yuan in 2020, and further declined to 17.012 billion yuan in 2021.
Due to discounts and promotions, as well as the reduction in the flow of visitors and the closure of temporary stores, the gross profit margin in the first quarter of this year showed a downward trend of 34.3%, compared with 39.4% in the same period of 2021. Gross margins over the past three years have also shown a downward trend year by year. In 2019, 2020 and 2021, gross profit margins were 51.1%, 38.9% and 32.9% respectively. The decrease in gross margin was primarily due to higher costs of sales, including increases in customs duties, excise duties and other related taxes paid on taxed goods, as well as usage discounts and promotions.
The ratio to capital liabilities is steadily declining. In 2019, 2020 and 2021, it was 21.1%, 19.2% and 16.2% respectively. The gearing ratio in the first quarter of this year was 15%.
According to the prospectus, China's tax exemption continues to promote the development of China's tax-free industry, and it is expected that China's tax-free policy will be further relaxed, and the favorable tax-free policy for outlying islands will be implemented soon.
Net profit fell 30% in the first half of this year
According to the prospectus, China's China Free stores are still facing challenges.
As of the last practicable date, 26% of the stores in China that were temporarily closed after the COVID-19 pandemic resumed normal operations, 11% of the temporarily closed stores resumed operations with reduced capacity, and 63% of the stores remained temporarily closed.
In the first quarter of this year, the revenue and net profit of China's china exemption fell compared with the same period last year. Revenue, gross profit and operating profit in the second quarter of 2022 were lower than in the same period in 2021 due to store closures, logistics and operational disruptions in Shanghai, the use of discounts as promotional activities and overall consumption decreases, while the decline in revenue, gross profit and operating profit was more severe than the decline in the first quarter of 2022.
In the second quarter of 2022, orders increased by more than 80% compared to the same period last year, partially offsetting the decline in passenger traffic and the temporary closure of stores. Due to the general disruption of business due to the rebound of the COVID-19 epidemic and the subsequent implementation of epidemic control measures, the total revenue in the first half of 2022 was 27.651 billion yuan, down 22.2% year-on-year. Net profit was RMB4.552 billion, down 30.4% year-on-year.
Passed the listing hearing for the second time
China China Exemption Zone is regarded as one of the important concept stocks in the Hainan Free Trade Zone. From July 1, 2020, the new tax exemption policy for Hainan outlying islands began to be implemented, and the stock price of China's China-free A shares also continued to rise, once exceeding 400 yuan.
While the performance of 2021 is growing, the stock price of China's China Exemption A shares has fallen all the way. At the end of 2021, the high point of China's A-share price was almost "waist cut", hovering around 200 yuan, falling to a low of 154.99 yuan in April this year.
According to HKEx documents, on 22 November 2021, China Exempt passed the listing hearing for the first time. However, at the time of "one foot at the door", China's China Exempt A-share (601888.SH) issued an announcement that due to the impact of the new crown pneumonia epidemic and other factors, the global economy has been greatly impacted, the capital market continues to be sluggish, and the company decided to suspend the process of the H-share issuance and listing, and the follow-up arrangement is determined according to market conditions. At present, the post-hearing information set submitted by China China Exemption on November 22 last year is in a "lapse" state.
China Central Exemption occupies the core channel of duty-free sales on Hainan's outlying islands, including Haikou Meilan International Airport, Sanya Phoenix International Airport, the core areas of Haikou and Sanya, and the Boao Forum for Asia site area. It also operates duty-free shops in major aviation hubs in China and the Asia-Pacific region, including Beijing Capital International Airport, Shanghai Pudong International Airport and Guangzhou Baiyun International Airport.
China's exemption from eating the dividends of the new tax exemption policy for outlying islands also shows its dependence on outlying island shops. In 2021, the proportion of revenue of China's zhongwei outlying island stores has increased from 57% in 2020 to 69.5%, and 72.1% of the revenue of China's zhongwei stores in the first quarter of this year came from outlying island stores.
Revenue from Nissho China accounted for 15.6%, 6.1%, 2.8%, 2.7% and 1.6% of the total revenue from continuing operations in 2019, 2020 and 2021 and as of the first quarter of 2021 and the first quarter of 2022, respectively. Revenue from Sunrise Shanghai accounted for 31.6%, 26.1%, 18.5%, 16.3% and 17.6% of the total revenue, respectively. Income from duty-free goods in Hainan Province accounted for 6.2%, 18.8%, 23.6%, 20.3% and 14.3% of the total revenue, respectively.
The acquisition of the series of Nissho entities allowed it to move into airports in Beijing and Shanghai, the first and second busiest airports in China by passenger traffic before the outbreak of COVID-19 in 2019, and two of the world's top ten busiest airports, the prospectus said. The acquisition of Hainan duty-free allows it to occupy an important market share in China's outlying island duty-free market and take full advantage of the benefits of Hainan's preferential policies.
In terms of equity, China National Travel Service Group is the majority shareholder of China, holding 55.3% of the shares. In March 2017, China Exemption Group acquired a 51% stake in Sunrise Duty Free Group Co., Ltd. for RMB38.8 million. In February 2018, China Exemption Group spent RMB1.5 billion to acquire a 51% stake in Sunrise Tax Free (Shanghai) Co., Ltd. In May 2020, Cité International Travel Service (CNS) spent RMB2.065 billion to acquire a 51% stake in Hainan Duty Free Co., Ltd.
It is worth noting that on July 29, Luzhou Laojiao issued the "Announcement of the Resolution of the Nineteenth Meeting of the Tenth Board of Directors", indicating that the board of directors of the company unanimously deliberated and passed the "Proposal on Investing in the H-Share Offering of China Tourism Group China Exemption Co., Ltd." According to the announcement, Luzhou Laojiao intends to invest 80 million US dollars (including brokerage commissions, transaction fees and other related fees) as a cornerstone investor to subscribe for overseas listed foreign shares (H shares) shares that are exempted from issuance in China.
As of August 10, China's China Exemption (601888. SH) closed at 196 yuan, down 0.74%, with a total market value of 382.7 billion yuan, down 10.03% year-to-date.
Responsible editor: Wang Jie Photo editor: Shi Jiahui
Proofreader: Luan Meng