【行业研究报告】中国中免-Looking past the weak 2Q; earnings risk diminishing as consensus is subtly edging down; upgrade to BUY

PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGEPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGEMOREREPORTSFROMBLOOMBERG:RESPCMBRORhttp://www.cmbi.com.hkChinaConsumerSectorJosephWong(852)39000838josephwong@cmbi.com.hkZhengXiaohuizhengxiaohui@cmbi.com.hkStockDataMktCap(RMBmn)360817Avg3mthst/o(RMBmn)2,38852wHigh/Low(RMB)343.3/156.1TotalIssuedShares(mn)1,952Source:WindShareholdingStructureChinaTravelGroup53.3%HKSC9.8%CSFC3.0%Source:WindSharePerformanceAbsoluteRelative1-mth12.6%5.6%3-mth-1.8%2.2%6-mth-13.2%-2.2%Source:Wind12-mthPricePerformanceSource:WindAuditor:PricewaterhouseCoopersRelatedReports1.1Q22belowmarketalthoughGPMreboundedonstrong2M22momentum;keepHoldonfluidCOVIDsituation–26Apr20222.“Managementinitiativesmaynotfullydispeluncertaintyovertheplannedmarginsrecovery;downtoHOLD”–8Mar20220.050.0100.0150.0200.0250.0300.0350.0Jun-21Sep-21Dec-21Mar-22Jun-22601888CHSHSZ300(rebased)(RMB)BUY(Up)TargetPriceRMB232.0(PreviousTPRMB192.0)Up/Downside+25.6%CurrentPriceRMB184.818Jun2022WebelievetheworstforCTGDFislikelyover,uponsignsofre-openinginShanghaifromJuneonwardsandthegradualrolloutofpro-growthpolicies.Whiledomestictravelling,inourview,mightnotstandattheforefronttoseeimmediatebenefitsfromthere-opening,expectationoftravelresumptionhasbeenbuildinguptowards3Qwithreferencetothecasesoverpastfewyears.Fromhere,weseescopefortravellingdemandtorecoversequentiallyinto4Q,particularlywhenthequarterisseasonallyclusteredwithfestivalsandshoppingcampaignsthatcatalyzeleisurespending.Earnings-wise,2Qshouldlookdismalgivenac.90%declineinairporttraffictoShanghaiAirportandthattoHainan,inourview,unlikelytolooksignificantlybetter.City-wiselockdowncouldalsorepresentatemporaryhiccupindeliverylogisticsforonlinesales.Thatsaid,ourchannelchecksuggestedthatmarginshavebeenholdingrelativelywellduring5.1,ascontrastedtoourpreviousexpectationthatunderpinnedourHOLDrating.Consideralsowhenconsensusgraduallyedgestowardsourbelow-marketestimates(wewere6%+below),CTGDF’srisk-rewardisturningmorefavorabletous.Werecommendinvestorstolookpasttheweak2Q,whichisgraduallybeingpriced-in,andweupgradedCTGDFtoBUYwithahigherTPofRMB232(fromRMB192).Earningsrevisions.Wecutour2022Erevenuebyc.17%asaresultof1)a19%cutin2022ErevenueofShanghaiAirport/Sunrise;and2)an18%cutin2022EHainanoffshoreduty-freerelatedrevenuewhichnowstandsatRMB67bn(fromRMB81bn).Separately,weraisedour2022/23EGPMby1.5/1.3pp.Theseinaggregateexplaina12%cutinour2022Enetprofits.Wearestillc.6%belowconsensus.Hainan’sduty-freerelatedsalestarget.WealsoloweredourforecastfromtheofficialRMB100bntoRMB80bn,basedonan80%+marketshare(2021:c90%)thatCTGDFcouldachieveontheisland.Valuation.OurnewTPisnowbasedon46.5x(upfrom34.0x)end-22EP/E