全球-休闲商品与服务业-全球旅游零售：海南全球旅游零售市场游戏规则改变者.docx

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1、全球-休闲商品与服务业-全球旅游零售：海南，全球旅游零售市场游戏规则改变者Global Research9 July 2020 Global Travel Retail UBS Evidence Lab inside: Hainan, a game changer for the global travel retail market?Hainan policy heralds a new era, yet its just the start Our recent investor discussions reveal key industry debates centre on post

2、COVID-19 outlook and competition from new entrants. We find Hainan is an underappreciated growth story. Leveraging insights from 7 UBS teams and UBS Evidence Lab datasets (gt;Access Dataset), we forecast China duty-free sales to reach US$29bn by 2025E, implying a 25% 6-year CAGR, as we expect new Ha

3、inan policy effective 1 July 2020 to offset tourist decline and unlock industry upside. We expect China to gain market share in global travel retail, up from 10% in 2019 to over 20% in 2025E, with Chinese duty- free operators, European luxury brands and prestige cosmetics as main beneficiaries. Hain

4、an to bring new hope to post COVID-19 travel retail business Travel retail is among the industries most impacted by the pandemic. With recent policy relaxation, we now forecast China duty-free sales to reach Rmb203bn/US$29bn in 2025E, nearly quadrupling the size of 2019. A key growth driver is the n

5、ew Hainan policy, which: 1) raises quota from Rmb30k/US$4.3k to Rmb100k/US$14.3k; 2) adds seven new categories to eligible products list (including consumer electronics); and 3) removes the single-item duty-free allowance cap, which is a clear positive for luxury goods. We forecast Hainan duty-free

6、sales to rise to Rmb90bn by 2025E, representing 45% of China duty-free sales (vs 25% in 2019), among which sales contribution from luxury goods may rise to 40% from 15% now. UBS luxury team expects the percentage of Chinese luxury consumption done domestically to surpass 50% by 2025E. New DFS busine

7、ss licenses a possibility, but CTG Duty Free impact likely limited We do not rule out the possibility of new DFS business licenses being issued; however, counter to consensus, we expect CTG Duty Frees market share in China to remain over 80% by 2025E. We argue that: 1) the key government considerati

8、on behind duty-free policy relaxation is to retain Chinese buying at home, which could also boost fiscal income; as such we think China is unlikely to open duty-free operating rights to foreign players or private companies; and 2) CTG Duty Free has strong competitive advantages in terms of procureme

9、nt, sales channel and pricing. Raising PT of CTG Duty Free, we expect luxury/prestige cosmetics to benefit We lift our DCF-based PT for CTG Duty Free from Rmb99.20 to Rmb242.30 as we raise 2020-22E earnings 14-44% (WACC cut from 8.3% to 7.9%) and reiterate Buy. We also like prestige cosmetics names

10、and luxury names with a strong China presence. Figure 1: Our most preferred stocksMkt cap Price target (LC) Price PE (x)Xin ChenAnalyst S1460511050002xin.chen+86-21-3866 8864 Ingrid ZhangAnalyst S1460517080003ingrid.zhang+86-21-3866 8853 Zuzanna Pusz, CFA Analyst zuzanna.pusz+44-20-7567 1883 Guillau

11、me Delmas Analyst guillaume.delmas+44-20-7568 8568 Carey Sloane Analyst carey.sloane+1-212-713 8695 Hisae KawamotoAnalyst hisae.kawamoto+81-3-5208 6270 Susy Tibaldi, CFA Analyst susy.tibaldi+44-20-7568 5989 Timothy Arcuri Analyst timothy.arcuri+1-415-352 5676 Munjal ShahAnalyst munjal.shah+1-212-713

12、 2113 Kate RusanovaAnalyst kate.rusanova+44-20-7568 9285 Jennifer Han Analyst jennifer.han+82-2-3702 8802 Bruce MiAssociateBeauty LOrealOREP.PA 180.1Buy310.00 310.00 285.40 40 34bruce.miEstee LauderEL.N 69.8Neutral172.00 172.00 188.61 41 34+86-21-3866 8851 Consumer electronics AppleAAPL.O 1679.9Buy4

13、00.00 400.00 381.37 30 23 Prices as of 8 July 2020. Source: Thomson Reuters, UBS estimatesThis report has been prepared by UBS AG London Branch. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 44. UBS does and seeks to do business with companies covered in its research reports. As a res

14、ult, investors should be Leisure Goods amp; Services Global Equities SectorCompanyTickerUS$ bnRatingOldNew(LC)20E21E China DF operatorsCTG Duty-Free601888.SS 54.6Buy99.20242.30195.8684 46LVMH LVMH.PA 228.3Buy429.00429.00399.8044 29 European luxuryHermesHRMS.PA 91.8Buy817.00817.00767.6057 44Kering PR

15、TP.PA 70.0Buy580.00580.00491.9028 19aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider thisContents INVESTMENT THESIS . 4Investor concerns . 4 Our view . 5 I.2019-25E China duty-free sales CAGR could be 25% . 8 Duty-free &n

16、dash; an effective way to shift overseas spending back to China and expand domestic demand . 8 China duty-free sales to reach Rmb203bn in 2025E . 9 II.Hainan duty-free market key driver for China duty-free sales .10Continued relaxation of Hainan offshore duty-free policy . 10 What size can Hainan of

17、fshore duty-free market achieve by 2025? . 13 I.Market concerns: competition may intensify . 19 II.Our view: Industry competition not likely to intensify in next 5 years . 20Policy: More duty-free licenses to be issued, but likely only to SOEs . 20 CTG Duty Free could be a duty-free retailer as well

18、 as wholesaler . 20 SECTOR IMPLICATIONS . 23 Duty-free operators . 23 CTG Duty Free (601888.CH, Buy, PT Rmb242.30）. 23 European luxury . 23 Beauty brands . 28 Estée Lauder (EL.N, Neutral, PT US$172.00 ）. 29 LOréal (OREP.PA, Buy, PT €310 ）. 29 Beiersdorf (BEIG.DE, Sell, PT €89

19、) . 30 Shiseido (4911.T, Sell, PT ¥5,350.00）. 30 KOSE (4922.T, Sell, PT ¥10,800.00) . 30 LG Hamp;H (051900.KS, Buy, PT Won1,620,000) . 31 Amorepacific (090430.KS, Neutral, PT Won176,000) . 31 Consumer electronics . 31 Apple (AAPL.O, Buy, PT US$400.00）. 32 China Tourism Group Duty Free Corp .

20、 33 Xin ChenAnalyst S1460511050002xin.chen+86-21-3866 8864 Ingrid ZhangAnalyst S1460517080003ingrid.zhang+86-21-3866 8853 Zuzanna Pusz, CFA Analyst zuzanna.pusz+44-20-7567 1883 Guillaume Delmas Analyst guillaume.delmas+44-20-7568 8568 Carey Sloane Analyst carey.sloane+1-212-713 8695 Hisae KawamotoAn

21、alyst hisae.kawamoto+81-3-5208 6270 Susy Tibaldi, CFA Analyst susy.tibaldi+44-20-7568 5989 Timothy Arcuri Analyst timothy.arcuri+1-415-352 5676 Munjal ShahAnalyst munjal.shah+1-212-713 2113 Kate RusanovaAnalyst kate.rusanova+44-20-7568 9285 Jennifer Han Analyst jennifer.han+82-2-3702 8802 Bruce MiAs

22、sociate bruce.mi+86-21-3866 8851Global Travel Retail UBS Research UBS Research THESIS MAP Most preferred Least preferredCTG Duty Free, LVMH, Kering, Hermes, LOréal, Apple, Estée Lauder Shiseido, KOSEPIVOTAL QUESTIONS Q: How much can China duty-free sales achieve in 2025?We estimate Chi

23、na duty-free sales could reach Rmb203bn in 2025, implying a 2019-25E CAGR of 25%, mainly driven by the Hainan duty-free market. Considering: 1) a rise in the per person annual shopping quota from Rmb30k to Rmb100k; 2) the launch of an online replenishment service; 3) removal of the single-item duty-

24、free allowance cap; and 4) tourists volume to Hainan could be boosted by Hainans construction of a free-trade port, we estimate Hainan duty-free sales could reach Rmb90.5bn in 2025E, for a 2019-25E CAGR of 37%, with potential sales upside of Rmb380bn. moreQ: Will competition in Chinas duty-free sect

25、or significantly intensify in the next five years? Not likely. We think China is unlikely to grant duty-free licenses to overseas operators or private enterprises; even if the sector opens more in the future, any new entrants are likely to be SOEs. Considering that CTG Duty Frees concession contract

26、s at Chinas major hub airports has a remaining term of more than four years, its dominance in the Hainan offshore duty-free market, and its significant edges in procurement, product prices, and other areas, we believe that even with continued increase in duty-free licenses, CTG Duty Free could retai

27、n its leadership and maintain a market share of over 80% by 2025. moreQ: How much sales could downtown outbound DFS contribute to China duty-free sector in 2025 if it opens to Chinese travellers in 2020? We estimate that downtown outbound duty-free stores can contribute Rmb20bn sales in 2025 if it o

28、pens to Chinese travellers in 2020. Compared to other DFS formats, downtown stores have clear advantages such as no shopping time constraints, better shopping experience, and richer product categories, making them better suited for luxury sales. We think this would be the next catalyst to further bo

29、ost Chinas duty-free sales. UB SE vi denc eLa b:De codi ngth ep a th st oaU S $70bnreve nu eoppor t unity2/13/2019 UBS VIEW Although economic softness and COVID-19 have negatively impacted consumption, we expect China duty-free sales to reach Rmb203bn in 2025 (3.8x 2019 sales), driven by substantial

30、 policy relaxations for Hainan offshore duty-free market and the launch of online shopping, which enables customers to buy duty-free goods without going abroad. Leveraging its advantages in economies of scale and more comprehensive duty-free licenses, CTG Duty Free could be the biggest beneficiary o

31、f the sector boom. We expect the company to maintain a monopoly with market share over 80% in 2020-25.EVIDENCE 1) Effective from July 1: a) Hainan offshore duty-free annual shopping quota raised to Rmb100k per person; b) single-item duty-free allowance cap removed; c) raise per-visit purchase quanti

32、ty limit for cosmetics. 2) Sunrise Shanghai launched online direct delivery service in Q120, and Hainan duty-free online replenishment service came online in April. 3) CTG Duty Free has clear advantages in terms of economies of scale and duty-free product retail prices.CTG Duty Frees share price imp

33、lies 2021E PEG of 1.1x, lower than the average of A-share tourism companies (2.8x) and a 2019-21E net profit CAGR higher than most global travel retailers. As we expect CTG Duty Frees market share to remain over 80% in the next five years and we believe it could be the biggest beneficiary of the sec

34、tor boom, we think its valuation could be supported by its fundamentals, and thus believe there is more upside for a re-rating. WHATS PRICED IN?Market concernsGlobal Travel Retail UBS Research INVESTMENT THESIS Return Investor concerns 1) COVID-19 has had a negative impact on travel in 2020, leading

35、 to a simultaneous decline in Hainan offshore duty-free and airport inbound/outbound duty-free sales. Market thinks Chinas duty-free sales are unlikely to recover to 2019 levels by 2022;2) Wangfujing was granted duty-free license in early June. The market is concerned about further relaxing of marke

36、t access and whether local private enterprises (eg, Alibaba) or overseas duty-free operators could also gain duty-free licenses and operate duty-free business in China. Figure 2: Summary of investment thesis #1 COVID-19 has significantly reduced travel demand; therefore Chinas duty-free sales are un

37、likely to recover to 2019 levels by 2022.#2 Wangfujing was granted a duty-free license in early June. The market believes that overseas operators and Chinese private companies could also gain access to the duty-free market, and market competition could significantly intensify.Market size Geographica

38、l locationsHainan island With new Hainan offshore duty-free policy taking effect on 1 July, we expect a substantial increase in luxury/fashion goods sales and pre-customer spending, combined with online replenishment service; we also expect sales in 2025 to increase by 5.6 times from 2019. Airport D

39、FS Post-COVID-19, benefiting from the increase in fashion goods/luxury brands and boutique brand stores, the steady growth of perfume and cosmetic products, as well as the double-digit growth in international passengers, offline duty-free sales could maintain double-digit growth in 2021-25E. Downtow

40、n DFS If downtown DFS opens to Chinese outbound travellers, we estimate sales could reach Rmb20bn within 5 years. Conclusion We expect China duty-free sales to reach Rmb203bn in 2025, implying a CAGR of 25% in 2019-25. This forecast does not factor in the opening of downtown DFS to Chinese outbound

41、travellers.Competition Potential new entrants SOE retailers Possible. Wangfujing (600859.CH) announced in early June that it has secured duty-free license. Private enterprises Unlikely Foreign duty-free operators UnlikelyOur view Conclusion CTG Duty Free could retain over 80% market share in the nex

42、t 5 yearsMajor beneficiaryChina duty-free operatorsTop leaders to benefit greatly from policy relaxationCTG Duty FreeEuropean luxury goodsNew Hainan offshore duty-free policy could drive further repatriation of overseas spending Hermes, Kering, LVMH, Prada, Richemont, Salvatore Ferragamo, BurberryPr

43、estige cosmeticsNew Hainan offshore duty-free policy brought more profit upside for prestige cosmeticsEstée Lauder, LOréal, Beiersdorf, Shiseido, KOSE Consumer electronicIt is the first time that mobile phones, tablets, wearable electronics, etc. are allowed in China duty-free channel, wh