20230710-招银国际-中国中免-601888.SH-Earnings_expectation_is_settling_4页

China Tourism Group Corp Ltd (CTGDF, 601888 CH) Summary

• Company Overview: CTGDF is a major Chinese tourism and retail corporation with a focus on domestic consumer markets. It operates in various regions like Hainan and is poised for growth amid policy-driven tailwinds.

• Financial Performance:

  • Q22023 results showed revenue of RMB35.9 billion (up 29.7% YoY) but net profit of RMB3.9 billion (down 1.9% YoY). Forecasts indicate Q2 revenue at RMB15.1 billion (+38.8% YoY), up 14.3% in net profit YoY.
  • Key factors contributing to the net profit miss include a gross profit margin (GPM) below expectations (32.6%, below previous quarters), a weakening RMB inflating procurement costs, inventory shortages for accessories, and lower profitability in airport DFS operations.

• Analyst Perspective:

  • Despite the minor net profit shortfall, the downturn in earnings could be nearing its end if momentum extends into the second half of the year. Investor sentiment is cautious, with full-year net profit forecasts reduced to RMB7-8 billion.
  • The analysis suggests near-term stock rally may be valuation-driven, as current prices reflect lower expectations, but offer upside potential.

• Key Long-Term Initiatives and Drivers:

  • Positive factors include the success of the new Haikou DF mall, which already contributes one-third of sales from that site with net profit gains, and the joint venture with CNSC (partially owned by CTGDF) expected to drive synergy.
  • Major drags include diverted tourism traffic overseas and weakening domestic consumption sentiment, which continue to challenge performance.

• Valuation Metrics and Targets:

  • Target price is RMB232.00, representing an 111.6% upside from the current price of RMB109.66, based on a 48.0x end-2023 forward P/E multiple.
  • Financial projections show steady revenue growth (e.g., to RMB123.77 billion by 2025), with improving operating margins and ROE, but higher risks in terms of profitability consistency.

• Overall Outlook: The company benefits from policy support and new initiatives, but execution challenges from macroeconomic factors could limit near-term gains. Valuations may support recovery if fundamentals improve.