20180216-川财证券-Chuancai_Research_2018_Strategy_Report_2018_China_Equity_Market_Leisure_Services_Outlook_33页_2mb

2017-2018 Leisure Services Sector Summary

1. 2017 Review: Leisure Services Sector Underperformed

• Sector Performance:
  The leisure services sector underperformed the broader A-share market in 2017, with a decline of 6.43% by Dec 26, 2017, compared to the CSI 300 index drop of 27.01%. It ranked 16th among 28 A-share sectors.

  • Segment Performance:
    • Hotel: Steady growth in RevPAR.
    • Travel: Moderate performance.
    • Scenic Spot: Weak growth.
    • Dining: Minimal growth.
  • Stock Performance:
    • Only three companies showed gains: CITS (601888.SH), BTG HOTELS (600258.SH), and JINJIANG SHARES (600754.SH).
    • Most stocks in the sector experienced losses.

• Sector Growth:

  • Total operating revenue in 1-3Q2017 reached CNY85.023 billion, up 22.46% YoY.
  • Net profit attributable to shareholders of the parent company reached CNY7.178 billion, up 23.74% YoY.
  • Excluding SANXIANG IMPRESSION (000863.SZ), revenue and net profit grew by 29.55% and 32.99% YoY, respectively.

• Sector Valuation:

  • The sector's average P/E ratio was 38(X) in 2017, a historically low level since 2013.
  • Scenic Spot:
    • SONGCHENG (300144.SZ): 26(X)
    • CYTS (600138.SH): 27(X)
    • EMEI SHAN (000888.SZ): 28(X)
  • Outbound Tourism:
    • HNA CAISSA (000796.SZ): 34(X)
    • BEIBU GULF TOURISM (603869.SH): 27(X)
  • All segments were undervalued relative to historical averages.

• Industrial Prosperity:

  • Domestic tourism saw growth, with 2.537 billion tourists in 1H2017 (up 13.5% YoY) and CNY2.17 trillion in revenue (up 15.8% YoY).
  • Inbound tourism increased slightly to 69.5 million (up 2.4% YoY).
  • Outbound tourism revenue reached CNY60.1 billion (up 4.3% YoY), with 62.03 million overseas travelers (up 5.1% YoY).

2. 2018 Outlook: Focus on Industrial Leaders and Undervalued Companies

• Duty-Free Segment:

  • Expected to benefit from consumption upgrade and favorable policies.
  • Hainan Province is a key focus area, with the Hainan Airport completion and 30th anniversary in April 2018.
  • Shanghai Airport duty-free operation is set to expire in March 2018, with a new bidding round expected in early 2018.
  • Urban duty-free shops are gaining traction due to higher revenue compared to airport-based ones.

• Hotel Industry:

  • The hotel industry experienced rebound since 2016, with RevPAR showing steady growth.
  • Mid-end hotels are becoming more prominent, driven by consumption upgrades and market demand.
  • Economic hotels are also improving their performance.
  • Companies like BTG HOTELS (600258.SH) and JINJIANG SHARES (600754.SH) are highlighted for their growth in RevPAR.
  • Supply and demand rebalancing has contributed to the industry's recovery.
  • Mid-end hotel ratio in China is expected to rise to 20-30% in the next 3-5 years, potentially reaching 40-50% in the long term.
  • Huanan and Home Inn are key players expected to lead the mid-end hotel development.

• Outbound Tourism:

  • The segment is expected to maintain steady growth in the long run.
  • Improvements in both supply and demand are anticipated, including better visa policies, international airline services, and CNY appreciation.
  • Tourist volume in different destinations may rebound.
  • European travel showed a strong recovery, with 65% YoY increase in 1H2017 and 29% YoY growth in 3Q17.
  • Low penetration rate remains a key issue, with only 5.1% of the population traveling abroad, significantly lower than developed countries.

• Scenic Spots:

  • Expected to maintain high growth in the long term due to consumption upgrades and increasing tourist numbers.
  • SONGCHENG (300144.SZ) and CYTS (600138.SH) are highlighted for their undervalued status and strong management and brand capabilities.
  • Ancient town tourism and live performances are gaining popularity.
  • Extension and transformation of scenic areas are seen as key strategies to improve competitiveness.

3. Investment Suggestions

• The report suggests an "Increase" rating for the leisure services sector in 2018.
• Focus on industrial leaders and undervalued companies that benefit from consumption upgrade trends.
• Highlighted companies include:
  • CITS (601888.SH): Duty-free segment.
  • BTG HOTELS (600258.SH) and JINJIANG SHARES (600754.SH): Hotel industry.
  • HNA CAISSA (000796.SH): Outbound tourism.
  • SONGCHENG (300144.SZ) and CYTS (600138.SH): Scenic spots.

4. Risk Reminder

• Weaker-than-expected growth in the domestic tourism market.
• Natural disasters or extreme weather affecting tourist numbers.
• Regional political turmoil or terrorist attacks creating safety concerns.