According to a research report released by Anxin International, China exemption (01880) released its results for the first three quarters of 2023, KuaiBao. 2023Q1-Q3 achieved revenue of 50.84 billion yuan, an increase of 29.1 percent over the same period last year, and its net profit was 5.2 billion yuan, up 12.3 percent over the same period last year, deducting 5.18 billion yuan of non-return net profit, an increase of 13.1 percent over the same period last year. Of this total, Q3 realized revenue of 14.98 billion yuan, an increase of 27.9% over the same period last year, and its net profit was 1.33 billion yuan, an increase of 93.2% over the same period last year.

The main points of the report are as follows:

Q3 performance in line with market expectations, gross profit margin continues to improve

2023Q1-Q3, China China exemption realized revenue of 50.84 billion yuan, an increase of 29.1% over the same period last year, and its net profit was 5.2 billion yuan, an increase of 12.3% over the same period last year, deducting 5.18 billion yuan of non-return net profit, an increase of 13.1% over the same period last year. According to the performance of a single quarter, Q3 achieved revenue of 14.98 billion yuan, an increase of 27.9 percent over the same period last year and an increase of 7 percent over the same period in 2021, while the net profit of returning home was 1.33 billion yuan, an increase of 93.2 percent over the same period last year and a decrease of 57 percent compared with the same period in 2021. As Q3 is the off-season of tourism in Hainan, the overall performance is basically in line with market expectations. In addition, Q3 gross profit margin returned to 34.27% (Q1/Q2 gross profit margin is 28.75% Q1/Q2 32.47%), year-on-year increase in 9.58pp, month-on-month increase in 1.8pp, mainly due to the continuous improvement of gross profit margin brought by product structure optimization and narrowing discount margin. However, due to the rise in passenger flow and airport rents, the net interest rate fell 1.47pp to 8.90% month-on-month.

The demand for double-holiday tourism breaks out, and consumption still needs to be restored.

According to data from Hainan Airport Group, during the Mid-Autumn Festival + National Day double festival, Haikou, Sanya and Qionghai completed a total of 7276 takeoffs and landings, with a passenger throughput of 1.158 million, an increase of 143% and 255% respectively over the same period in 2019. Among them, Haikou Meilan Airport completed 4182 flight takeoffs and landings, with a passenger throughput of 636000, an increase of 108 percent over the same period last year, and an increase of 21 percent over the same period in 2019. Sanya Phoenix Airport completed 2953 takeoffs and landings, with a passenger throughput of 506000, an increase of 212 percent over the same period last year and 17 percent over the same period in 2019. In addition, during the Mid-Autumn Festival + National Day 8-day holiday, duty-free sales and shopping on Hainan outlying islands doubled compared with the same period last year. According to Haikou customs data, the amount of duty-free sales in Hainan outlying islands reached 1.33 billion yuan during the double period, an increase of 117% over the same period last year; the number of duty-free shoppers reached 170000, an increase of 143% over the same period last year; and the average daily sales reached 170 million yuan, down 5.9% from May Day in 23 years (180 million yuan) and an increase of 89.9% over 22 years of National Day (90 million yuan). Per capita consumption was about 7824 yuan, down 3.4 percent from May Day in 23 years (8101 yuan) and 10.7 percent from 22 years of National Day (8761 yuan). From this, it can be seen that although the long holiday has brought about a great outbreak of tourism demand and a significant increase in passenger flow, per capita consumption still fails to achieve a very good growth, and overall consumption is still continuing to recover.

Heavy luxury brand landed, looking forward to the performance in the peak season.

Prior to this, after a long period of negotiations, heavy luxury brands LV and Dior finally landed in Begonia Bay in Sanya. Although they all entered the second phase of Haitang Bay in the form of tax, they are still expected to bring high-quality and high-end customers to China exemption. In the future, the company will also continue to consolidate its position in Hainan and continue to promote the upgrading and expansion of the first and second phase of Haitang Bay and the construction of the third phase. Hainan tourism season is mainly in winter, especially around the Spring Festival, with the arrival of the peak season, as well as product structure optimization and discount tightening, the company's sales performance is expected to continue to improve. Under the background of the gradual liberalization of overseas tourism, Hainan's outlying island duty-free market and China exemption Group itself still have strong competitiveness, along with the landing of the city's tax exemption policy and the high prosperity of tourism on the island. Hainan can retain the shopping demand returned from overseas due to the epidemic to a greater extent. It is believed that with the continuous rebound of passenger flow in Hainan and the continuous growth of duty-free shopping demand on outlying islands, China exemption, as an industry leader, can give priority to enjoying the industry recovery dividend, so as to quickly restore a better performance.

Risk hints: the macroeconomic downturn affects consumption; the epidemic repeatedly affects passenger flow; and the policy dividend falls short of expectations.