CTGDF(601888)：EARNINGS EXPECTATION IS SETTLING

　　2Q pre-announced. After market close last Friday （7 July）， CTGDF pre- announced major financial data for its 1H23 results. Revenue came in at RMB35.9bn, up 29.7% YoY, when net profits reported at RMB3.9bn, down 1.9% YoY. This implies 2Q23 revenue and net profits to be RMB15.1bn and RMB1.6bn, up 38.8% and 14.3% YoY, respectively. In the announcement, the Company also disclosed that its 1H gross margin has improved by 7.8% HoH, when that of 2Q has gone up by 3.67% QoQ.
　　Our view. The RMB32.4bn sales achieved by Hainan operators for 1H23 should have given a good gauge to what CTGDF could attain over the same period. Meanwhile, we estimate Hainan contributed approximately RMB9- 10bn revenue to CTGDF for the quarter, and this should slightly track below us. Separately, net profit was a small miss on a few potential factors including 1） lower than expected GPM of 32.6% （although it continued to climb QoQ, it was still below 2Q22）， 2） a weakening RMB which inflated its procurement cost, 3） any bottleneck in accessories SKU which saw insufficient inventory in 1Q, and 4） a rising earnings contribution from airport DFS with lower profitability. Despite these, investor expectation on full-year net profit has already edged down to approximately RMB7-8bn. All else constant, if 1H momentum was to extend into 2H, we think the Company’s earnings downcycle could approach to its end. In other words, we believe any share price rally in the near term would mainly be valuation-driven.
　　Key long-term initiatives. While a diverted travel traffic （to overseas） and a faltering consumption sentiment were the known drags to CTGDF’s performance, we continue to see a few key positive for the Company to sustain its domestic leadership. These include 1） the new Haikou DF mall, when its sales have already surpassed one-third of that of Sanya Haitang Bay with positive net profits contribution, 2） the joint collaboration with CNSC （49% acquired by CTGDF in March this year） which should yield operational synergy aside from that of Hainan.
　　Valuation. Our TP is based on 48.0x end-23E P/E, which represents its average since 2020, when market started to re-rate the stock for a series of policy tailwinds. Our TP and earnings estimates are under review.
【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。