CTF Duty Free (1880 HK, HK$52.85, HK$6.15bn) – 1Q25 results 

CTF Duty Free posted an 11% YoY decline in 1Q25 revenue to RMB16.7bn whereas attributable profit dropped by 16% YoY to RMB1.94bn.  It marked the fifth consecutive quarter of revenue decline.  However, net profit for the quarter made a substantial sequential gain of 457% despite NPM dropping by 0.7 ppts to 11.6%.  Operating cash flow stood at RMB4.80bn, down 9.5% YoY.

The recently revised tax refund policy for tourists is expected to stimulate foreigners spending while in China.  It is expected to benefit from its large network of “downtown” duty-free stores and its collection of international brands.  

Our view – It is expected that the Labour Day long holiday would bring another wave of shoppers to Hainan Island.  According to Ctrip, as of mid-Apr, the pre-booking of hotels in Hainan rose by 93% YoY.  Booking of air tickets to Hainan also increased by 63% YoY while inbound air tickets increased by 315% YoY.  The ticker is trading at 20.7x forward PE.