Analysis of the Impact of Surge in Hainan Off-Island Duty-Free Shopping Revenue on the Performance and Investment Value of Operators like China Duty Free Group

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According to data from Haikou Customs, in the first week of 2024, Hainan off-island duty-free shopping revenue reached RMB 1.21 billion, a year-on-year increase of 88%, with the number of shoppers rising by 38.3%, marking a strong start [1]. However, this robust opening failed to sustain growth for the full year:

Indicator	2024 Data	YoY Change
Annual Shopping Revenue	RMB 30.94 billion	-29.3%
Number of Shoppers	5.683 million person-times	-15.9%
Number of Items Purchased	33.082 million items	-35.5%

The annual pressure on data was mainly affected by the following factors:

• Natural disasters such as Typhoon Yagi impacted Hainan’s tourism retail sector [2]
• Sustained diversion effect from outbound consumption
• Domestic brands squeezing duty-free market share
• Consumers increasingly prioritizing cost-effectiveness [2]

Entering 2025, the Hainan off-island duty-free market has shown a clear stabilization and recovery trend:

Time Period	YoY Growth Rate	Drivers
October 2025	+13%	Implementation of new duty-free policies
November 2025	+27%	Double 11 promotion activities
December 18-24, 2025	+55%	Christmas consumption peak season
First week of 2026	+88%	Combination of New Year and policy dividends [3]

The latest research report from Citigroup points out that Hainan’s strong sales trend is expected to continue during the winter peak season, with Hainan’s duty-free sales expected to grow by over 20% year-on-year in 2026 [3]. This positive expectation is mainly based on:

• Consumption potential unleashed by new duty-free policies
• Wealth effect driving recovery in high-end consumption
• Customer diversion effects from promotions and cultural entertainment activities (e.g., concerts)

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As the absolute leader in the Hainan off-island duty-free market (with an 82% market share), the performance of China Duty Free Group (601888.SS) directly reflects industry sentiment [4]:

Financial Indicator	2024	YoY Change	H1 2025	YoY Change
Operating Revenue	RMB 56.474 billion	-16.4%	RMB 28.151 billion	-9.96%
Net Profit Attributable to Parent Company	RMB 4.267 billion	-36.5%	RMB 2.6 billion	-20.81%
Gross Profit Margin	32.4%	-1.4 ppts	32.77%	-0.77 ppts

• Since Q1 2024, China Duty Free’s operating revenue, gross profit, and net profit have declined for six consecutive quarters [4]
• H1 2025 net profit shrank by over 51% compared to the peak in the same period in 2021
• Net profit in Q2 fell 32.21% year-on-year, increasing quarterly operating pressure [4]

Based on an in-depth analysis of the past four years’ data using financial analysis tools [0]:

: Neutral

• The company maintains balanced accounting treatment principles, with no extremely aggressive or conservative financial policies

: Low Risk

• Current ratio of 5.82, quick ratio of 4.03, with ample liquidity
• Asset-liability ratio is at a reasonable level for the industry
• Although operating cash flow fell 39.5% year-on-year, it remains positive

:

Indicator	Value	Industry Comparison
Net Profit Margin	6.38%	Below historical average
ROE	6.10%	Under pressure
Gross Profit Margin of Duty-Free Goods	39.5%	Significantly higher than general retail

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Based on analysis using professional valuation models, China Duty Free’s current share price of RMB 95.78 is higher than the base scenario valuation [0]:

Valuation Scenario	Intrinsic Value	Deviation from Current Price
Bear Scenario	RMB 66.97	-30.1%
Base Scenario	RMB 78.67	-17.9%
Bull Scenario	RMB 271.94	+183.9%
Weighted Average	RMB 139.19	+45.3% upside potential

:

Assumption Parameter	Bear Scenario	Base Scenario	Bull Scenario
Revenue Growth Rate	0%	1.8%	40.5%
EBITDA margin	14.1%	14.9%	15.6%
WACC	11.2%	9.7%	8.2%
Terminal Growth Rate	2.0%	2.5%	3.0%

Institution	Rating	Target Price (HKD)	Latest Adjustment
Citigroup	Buy	100	Upgraded (+38.9%) [3]
Soochow Securities	Buy	85	Maintained
Guotai Junan Securities	Buy	82	Maintained
Haitong Securities	Overweight	78	Maintained
Shenwan Hongyuan Securities	Buy	88	Maintained
CITIC Securities	Hold	76	Maintained
CICC	Overweight	92	Maintained

:

• 2025 net profit forecast: RMB 4.33 billion (neutral)
• 2026 net profit forecast: RMB 5.0 billion
• 2027 net profit forecast: RMB 5.52 billion
• Corresponding PE ratios: 34x/30x/27x (based on current share price)

Based on technical analysis indicators [0]:

Indicator	Value	Signal Interpretation
Share Price (2026-01-09)	RMB 95.78	-
20-Day Moving Average	RMB 87.09	Medium-term trend upward
50-Day Moving Average	RMB 83.80	Medium-term trend upward
200-Day Moving Average	RMB 69.69	Long-term trend upward
KDJ	K:75.9, D:71.6	Near the overbought zone
MACD	Golden cross pattern formed	Bullish signal
Beta (vs. SSE Composite Index)	0.75	Low volatility characteristics
Current Trend	Range-bound	Reference range: [87.09, 97.86]

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• 82% market share in Hainan’s off-island duty-free market, up nearly 1 percentage point year-on-year in H1 2025 [4]
• Owns 6 core stores in Hainan, including Sanya International Duty-Free City and Haikou International Duty-Free City
• Continues to expand port duty-free store operations, successfully winning bids for terminals such as Guangzhou Baiyun International Airport T3

• Policy benefits from the customs clearance operation of Hainan Free Trade Port on December 18, 2025 [4]
• Expansion of downtown duty-free store policies: 13 foreign exchange commodity duty-free stores in Beijing, Shanghai, etc. have been transformed, and downtown duty-free stores have been added in 8 cities including Guangzhou and Chengdu [2]
• Expansion of duty-free product categories: increased from 45 to 47 categories starting November 2025, adding pet supplies, portable musical instruments, etc. [2]

• Gross profit margin of duty-free goods sales is as high as 39.5%, far exceeding general retail formats (about 24%) [2]
• The high gross profit mainly comes from price competitive advantages brought by tax dividends

• Successfully entered markets such as Hong Kong, Macau, and Vietnam
• Duty-free stores at Hanoi Noi Bai International Airport and Phu Quoc International Airport have opened
• Promotes the “Guochao” (Chinese Chic) going global strategy, partnering with brands like Tongrentang and Bloomage Biotech

• Current P/E (TTM) of 58.28x is significantly higher than the industry average (about 35x)
• The share price is about 18% higher than the DCF base scenario valuation, limiting upside potential

• The overall high-end consumption market is weak, and international luxury giants have poor performance
• The recovery of residents’ consumption willingness may fall short of expectations

• Sustained diversion from the South Korean duty-free market
• Changes in the competitive landscape of downtown duty-free stores
• Domestic brands squeezing duty-free market share

• Progress of customs clearance operation policies
• Implementation effect of downtown duty-free store policies
• Uncertainty in adjustments to duty-free quotas

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:
The 88% surge in Hainan off-island duty-free shopping revenue sends a positive signal of consumption recovery. As the industry leader, China Duty Free will directly benefit from the market recovery. However, the current valuation has fully reflected recovery expectations, so investors are advised to adopt a phased position-building strategy.

Risk Preference	Recommended Strategy	Target Price Range
Conservative	Wait-and-see or light position	Wait for pullback to below RMB 85
Moderate	Phased position-building	Range of RMB 87-92
Aggressive	Appropriate participation	Chase upward after breaking RMB 100

:

• Monthly sales data of Hainan off-island duty-free
• Quarterly earnings guidance from the company
• Opening progress of downtown duty-free stores
• Rhythm of policy benefit releases

Scenario	6-Month Target Price	Expected Return	Trigger Condition
Bull	RMB 110	+14.8%	Hainan sales growth exceeds 25%, policy benefits are realized
Base	RMB 98	+2.3%	Sales growth of 15-20%, performance meets expectations
Bear	RMB 78	-18.6%	Sustained weak consumption, performance falls short of expectations

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The chart shows: (1) Annual sales trend of Hainan off-island duty-free; (2) Changes in YoY growth rate; (3) Quarterly revenue trend of China Duty Free; (4) Comparison of DCF valuation and current price

The chart shows: (1) Comparison of analyst target prices and current price; (2) Comparison of valuation indicators and industry averages; (3) Consensus earnings forecasts; (4) Investment value scoring matrix

The chart shows the share price trend and technical indicator analysis of China Duty Free from 2024 to present

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[0] Jinling AI Financial Database - Real-time quotes, financial analysis, DCF valuation and technical indicator data of China Duty Free Group (601888.SS)

[1] Haikou Customs - Shopping data of Hainan off-island duty-free in the first week of the 2024 New Year

[2] 2024 Annual Report Summary of China Tourism Group Duty Free Corporation Limited - https://www.ctg.cn/2025-05-28/f1b1e712-75cc-41cf-a3bd-310b6f28e5ee1748426222323.pdf

[3] Citigroup Research Report - More Positive Outlook on Hainan Duty-Free Sales Growth, Upgrades Target Price of China Duty Free H-shares to HKD 100 (https://www.163.com/dy/article/KIR2EIVF05198ETO.html)

[4] Securities Times - China Duty Free’s H1 Net Profit Falls 20.81%, Duty-Free Leader Seeks Breakthrough with Diversified Layout (https://www.stcn.com/article/detail/3291014.html)

[5] Soochow Securities - China Duty Free (601888) H1 2025 Report Comment: Revenue Decline Narrows, Customer Flow Stabilizes (https://pdf.dfcfw.com/pdf/H3_AP202508271735306256_1.pdf)