UOB Kay Hian
Date of Report: Wednesday, 27 August 2025
China Tourism Group Duty Free Faces Challenging Quarter: Key Financials, Outlook, and Valuation Insights
Overview: China Tourism Group Duty Free’s 2Q25 Performance Under the Microscope
China Tourism Group Duty Free (CTGDF), one of the world’s largest duty-free operators, has released its 2Q25 and 1H25 results, revealing significant declines across key metrics. The company, listed under 601888 CH, is a heavyweight in the consumer discretionary sector, primarily engaged in the wholesale and retail of duty-free products including tobacco, wine, perfume, cosmetics, accessories, clothing, and electronics. Additionally, CTGDF invests in and develops commercial complexes anchored by its duty-free business.
UOB Kay Hian has downgraded CTGDF to HOLD, citing fair valuation despite a slight increase in the target price, driven by improved inventory management.
Stock Snapshot
- Share Price: Rmb71.41
- Target Price: Rmb75.30 (previous: Rmb70.80)
- Upside: +5.4%
- Market Cap: Rmb146,362m (US\$20,455m)
- Shares Issued: 1,952.5m
- 3-Month Avg Daily Turnover: US\$166m
- 52-Week Range: Rmb84.92 – Rmb53.52
- Major Shareholder: China Tourism Group (50.3%)
- FY25 NAV/Share: Rmb27.70
- FY25 Net Cash/Share: Rmb17.27
Financial Results: 2Q25 and 1H25 At A Glance
The latest quarter marked a pronounced weakening in both year-on-year (YoY) and quarter-on-quarter (QoQ) performance. Net profit fell sharply, while revenue and gross profits also contracted. The Sanya duty-free mall, a flagship location, saw a double-digit revenue decline, offset only slightly by marginal growth in the Haikou mall.
| Metric |
2Q25 |
1Q25 |
2Q24 |
YoY Change |
QoQ Change |
| Total Revenue (Rmbm) |
11,405 |
16,746 |
12,458 |
-8.5% |
-31.9% |
| Gross Profit (Rmbm) |
3,701 |
5,523 |
4,219 |
-12.3% |
-33.0% |
| Gross Margin (%) |
32.5 |
33.0 |
33.9 |
-1.4ppt |
-0.5ppt |
| EBIT (Rmbm) |
930 |
2,463 |
1,274 |
-27.0% |
-62.2% |
| EBIT Margin (%) |
8.2 |
14.7 |
10.2 |
-2.0ppt |
-6.5ppt |
| Net Profit (Rmbm) |
662 |
1,938 |
976 |
-32.2% |
-65.8% |
| Net Margin (%) |
5.8 |
11.6 |
7.8 |
-2.0ppt |
-5.8ppt |
Key highlights for 2Q25 and 1H25:
- Net profit dropped 32% YoY and 66% QoQ in 2Q25.
- Revenue for 1H25 was Rmb28,151m, down 10% YoY.
- Gross profit for 1H25 was Rmb9,224m, representing a 12% YoY decline, with gross margin at 32.8%.
- EBIT for 1H25 stood at Rmb3,393m, down 19% YoY, with a margin of 12.1%.
- Net margin for 1H25 was 9.2%, a decrease of 1.3 percentage points YoY.
- Inventory at end-2Q25 was Rmb16,888m, down 11% YoY but up 7% QoQ.
Segment Performance: Duty-Free, Duty-Paid, and Key Locations
The business experienced varying degrees of contraction across its segments and geographic locations. Most notably, the Sanya downtown duty-free mall saw significant revenue loss, while Haikou managed minimal growth.
| Segment/Location |
1H25 Revenue (Rmbm) |
1H24 Revenue (Rmbm) |
YoY Change (%) |
1H25 Operating Profit (Rmbm) |
YoY Change (%) |
1H25 Attributed Net Profit (Rmbm) |
YoY Change (%) |
| Group Duty-Free Sales |
20,343 |
21,670 |
-6.1 |
|
| Group Duty-Paid Sales |
7,189 |
9,158 |
-21.5 |
|
| CDFG Sanya Downtown DF |
10,343 |
11,986 |
-13.7 |
713 |
+10.9 |
605 |
+12.7 |
| Haikou Duty Free Co., Ltd. |
1,826 |
2,002 |
-8.8 |
67 |
-44.1 |
57 |
+13.0 |
| Sunrise DF (Shanghai) |
6,870 |
8,500 |
-19.2 |
495 |
-39.1 |
366 |
+18.1 |
- Sanya duty-free revenue fell 14% YoY in 1H25, while Haikou duty-free managed a 0.4% increase.
- Sunrise Shanghai’s revenue slumped 19% YoY, reflecting broader weakness in key urban markets.
- Despite revenue contraction, attributed net profit at Sanya, Haikou, and Sunrise Shanghai outperformed, growing double digits, mainly due to cost control and margin management.
Margins and Channel Analysis
- Offline channel revenue: Rmb19,703m for 1H25.
- Online channel revenue: Rmb7,828m for 1H25.
- Duty-free gross margin: 39.0% (down 0.5ppt YoY).
- Duty-paid gross margin: 13.1% (down 4.2ppt YoY), a result of intensified promotions and fierce online competition.
Forecast Revisions and Outlook
UOB Kay Hian has cut its earnings forecasts for 2025 and 2026 by 9% and 10% respectively, primarily due to a weaker than expected recovery in duty-free consumption. Revenue forecasts for 2025/26 were reduced by 12% and 11%, respectively. However, gross margin estimates have been raised slightly to reflect 1H25 performance, while opex estimates were also increased due to rising cost pressures.
Key Valuation Metrics
- PE Ratio (2025F): 33.7x
- PE Ratio (2026F): 27.5x
- Target Price: Rmb75.30 (up 6% due to improved inventory management)
- Dividend Yield (2025F): 1.5%
- ROE (2025F): 7.8%
- Net Debt/Equity (2025F): -57.0%
Comprehensive Financial Tables
Key Financials (Rmbm, unless stated)
| Year |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net Turnover |
67,540 |
56,474 |
56,025 |
63,015 |
69,632 |
| EBITDA |
9,618 |
7,449 |
8,280 |
9,794 |
11,033 |
| Net Profit (Reported) |
6,714 |
4,267 |
4,390 |
5,375 |
6,118 |
| EPS (Fen) |
324.5 |
206.3 |
212.2 |
259.8 |
295.7 |
| PE (x) |
22.0 |
34.6 |
33.7 |
27.5 |
24.1 |
| Dividend Yield (%) |
2.3 |
1.5 |
1.5 |
1.9 |
2.1 |
| Net Margin (%) |
9.9 |
7.6 |
7.8 |
8.5 |
8.8 |
| ROE (%) |
13.1 |
7.8 |
7.8 |
9.1 |
9.8 |
Strategic Initiatives and Stock Impact
- CTGDF introduced over 60 new brands in Hainan in 1H25, leveraging its first-mover advantage to diversify consumer offerings.
- Inventory improvement is underway, with a notable 11% YoY drop by end-2Q25.
- The company faces heightened online competition, necessitating increased promotional activity and weighing on gross margins, particularly in the duty-paid segment.
Valuation and Recommendation
UOB Kay Hian has raised the target price to Rmb75.30, reflecting improved inventory management and higher long-term working capital projections. However, with the stock trading at 33.7x 2025F PE and 27.5x 2026F PE, current valuation is deemed fair, leading to a downgrade to HOLD.
- Target price: Rmb75.30 (+6%)
- Valuation basis: DCF, implying 35.5x 2025F PE and 29.0x 2026F PE
- Stock currently trades at: 33.7x 2025F PE, 27.5x 2026F PE
- Recommendation: HOLD
Conclusion: Navigating Headwinds Amidst Recovery Uncertainty
CTGDF’s recent performance underlines the ongoing challenges in the post-pandemic duty-free retail landscape, with sluggish recovery in consumer demand, competitive pressures, and margin erosion. While the company’s efforts in inventory management and brand diversification are positive, the current valuation leaves limited upside for investors. Cautious optimism is warranted as the company navigates market headwinds and positions itself for a potential rebound in Chinese outbound and domestic travel retail demand.
