Every reporter Li Shaoting, intern reporter Yang Hui, every editor Zhang Haini
Image source: Visual China
On the evening of April 22, China CDFG (601888, SH) disclosed its 2021 annual report: Last year, the company achieved a net profit attributable to shareholders of listed companies of 9.654 billion yuan, a year-on-year increase of 57.23%. The fast-recovery duty-free business in Hainan has become a boost to its revenue. In terms of profit distribution, CDFG plans to distribute a cash dividend of 15 yuan (tax included) to all shareholders for every 10 shares.
As a leading stock in the concept of duty-free, China CDFG and the popular duty-free concept, and the good news of Hainan’s policy are “intimate” and “bringing out”, the stock price has soared from below 100 yuan, and even reached 402.78 yuan / share (previously restored, the same below). ). On April 22, China Duty Free closed at 176.98 yuan per share. Compared with the above-mentioned high point, the market value has evaporated by more than 400 billion yuan.
Dismantling CDFG’s growth path in 2021, Hainan’s business and online channels cannot be ignored. Among them, from the perspective of the overall development of the duty-free industry, online has become the general trend. Lai Yang, chief expert of the Beijing International Business Center Research Base, pointed out that online sales have a lot to do with a company’s supply chain, brand reputation, and prices. At present, China CDF’s online business development status has obvious advantages from a global perspective. However, China’s CDFG is unique, and it is difficult to copy it.
Profit of 9.654 billion last year
Affected by the new crown pneumonia epidemic, in the struggling tourism industry, although tax-free is not “outstanding”, its huge market size is enough to make tourism “small” people envious.
Recently, China Duty Free, known as the “leader” of duty-free, disclosed its 2021 annual report and 2022 first quarterly report. In 2021, CDFG will realize operating income of 67.676 billion yuan, a year-on-year increase of 28.67%; net profit attributable to shareholders of listed companies will be 9.654 billion yuan, a year-on-year increase of 57.23%. In terms of subdivision, the operating income of Hainan area was 47.096 billion yuan, a year-on-year increase of 57.19%; the operating income of Shanghai area last year was 12.491 billion yuan, a year-on-year decrease of 9.02%.
Operating costs have also risen while profits have grown. Last year, CDFG’s operating costs reached 44.882 billion yuan, a year-on-year increase of 43.76%. However, CDFG’s sales expenses fell by 56.36% year-on-year last year due to the sharp reduction in airport rent payable. Along with the rising operating costs, is the decline in gross profit margins. Last year, the gross profit margin of CDFG’s merchandise sales decreased by 7.14 percentage points year-on-year to 33.08%.
The tens of billions of revenue figures are indeed beautiful, but in the capital market, China’s CDFG’s performance is unspeakably outstanding. As a tax-free concept stock, China CDFG and the popular tax-free concept, the good news of Hainan’s policy is both “intimate” and “bringing in the past”, the company’s stock price has been soaring from below 100 yuan in April 2020, and the highest even reached 402.78 yuan / share. The closing price on April 22 was 176.98 yuan per share, which evaporated more than 400 billion yuan from the market value at the peak.
In this regard, since April this year, investors have repeatedly “called” the board secretary on the investor exchange platform, hoping that the company will introduce measures to maintain the stock price, but no relevant measures have been issued as of press time.
Although there is no action to maintain the stock price, the company has indeed achieved the promise of “returning investors with continuous and stable dividends” promised by the board secretary. According to the annual report, CDFG plans to distribute a cash dividend of 15 yuan (tax included) to all shareholders for every 10 shares. It is expected to distribute a cash dividend of 2.929 billion yuan, accounting for 30.34% of the net profit attributable to shareholders of the listed company in 2021.
Can digitization become the main theme of tax-free competition after the epidemic?
Judging from the financial report, CDFG’s revenue structure is actually very clear, and the development of its Hainan business is a key component of its profitability. According to the financial report, in 2021, CDFG’s duty-free business in Hainan’s outlying islands will continue to maintain high growth. Among them, the duty-free shops in Sanya will achieve an operating income of 35.509 billion yuan, a year-on-year increase of 66.58%, and a net profit attributable to shareholders of the listed company of 4.168 billion yuan, a year-on-year increase. 40.46%; Haimin Company achieved operating income of 15.962 billion yuan, a year-on-year increase of 61.05%, and realized a net profit attributable to shareholders of listed companies of 793 million yuan, a year-on-year increase of 20.75%.
However, with the liberalization of duty-free business qualifications, the entry-exit duty-free shops at the port have determined the business entities through bidding, and the duty-free shops on the outlying islands of Hainan have determined the business entities through competitive negotiation. China’s duty-free industry has entered a stage of orderly competition; many domestic enterprises have Applying for the duty-free business qualification, China CDFG’s “dominant” situation in Hainan has been broken.
Against this background, China CDFG continued to increase its business in Hainan last year. The 2021 annual report shows that during the reporting period, the Haikou International Duty Free City project newly invested 1.345 billion yuan, with a cumulative investment of 2.375 billion yuan. According to the previous reply from the China Duty Free Board Secretary to investors, the Haikou International Duty Free City project is expected to open within this year, covering a variety of formats such as tax retail, catering and accommodation.
Source: screenshot of webpage
In addition, the “Daily Economic News” reporter also noticed that China CDFG stated in its financial report that it will promote the operation of overseas capital in a timely manner, pay attention to the merger and acquisition opportunities of upstream brands and duty-free operators, and carry out vertical or horizontal mergers and acquisitions in the industrial chain in a timely manner.
At the end of last year, CDFG acquired 100% of the equity of Hong Kong China Travel Assets Co., Ltd., a wholly-owned subsidiary of China Tourism Group, in cash through a non-public agreement transfer. In December last year, Hong Kong China Travel Assets Co., Ltd. was included in the scope of China CDFG’s consolidated financial statements. After this related acquisition, in addition to solving the problem of horizontal competition with the controlling shareholder, China CDFG has also obtained the duty-free foreign exchange commodity business qualifications owned by Hong Kong China Travel Assets Co., Ltd., and can operate duty-free shops in the city that are returned to China for supplementary purchases. Make up for the last tax-free short board in one fell swoop, creating more possibilities for its business expansion.
However, the impact of the epidemic continues. According to the first quarterly report of 2022, China CDF’s main business is still growing from January to February. However, since March, the company’s operations have been greatly impacted by the adverse effects of multiple domestic outbreaks and local outbreaks. Net profit in the first quarter decreased by 9.99% compared with the same period of the previous year. Hainan’s business is also affected. In April this year, Sanya Duty Free City was closed for 9 days, and Hailv Duty Free City was closed for nearly half a month. As for the Shanghai business, although it showed a downward trend last year, it still accounted for about 18% of total revenue. Since the beginning of this year, the Shanghai area has been severely affected by the epidemic. It remains to be seen how the performance of this part will be.
In addition to the Hainan business, the online retail business that has continued to grow since the epidemic has also contributed to its revenue growth. CDF said in its financial report that platforms such as “cdf membership purchase” have continued to develop, and the WeChat applet “CDF members” has exceeded 20 million. The large membership platform has achieved remarkable results in stimulating consumption and increasing the repurchase rate, and the proportion of membership sales has increased from 52% to 87%. In the future, we will continue to increase brand introduction and commodity supply in online business, and promote the business integration of duty-free reservation and duty-paid commodity sales platform, and strive to reach 26 million members in 2022.
Lai Yang, chief expert of the Beijing International Business Center Research Base, told the “Daily Economic News” reporter that there are pros and cons to developing online sales. First of all, the products with better online sales are mostly cosmetics, skin care products, etc. This type of product has a short shelf life, and quick disposal can reduce the loss caused by inventory backlog. But on the other hand, compared with shopping mall brand counters, duty-free goods have the price advantage of excluding tariffs. If there is a strong supply chain channel capability, the online sales of duty-free enterprises will have strong price competitiveness.
As for whether online sales will become a key breakthrough point for tax-free development in the future, Lai Yang pointed out that online tax-free consumption will indeed increase gradually in the long run, but online sales are also closely related to the company’s supply chain, brand reputation, and the price of goods. etc. have a lot to do. At present, CDFG’s online business development status has obvious advantages from a global perspective, but CDFG is unique, and it is difficult to replicate. Once the epidemic is over, the consumption of offline counters will return. After all, the attractiveness of physical stores to consumers should not be underestimated.
Regarding issues such as the decline in stock prices, the promotion of overseas capital operations, and the response to the impact of the epidemic, the reporter called CDFG, but no reply was received as of press time.
