CTG DUTY-FREE (01880) surged more than 4% in afternoon trading, and as of press time, it was up 2.56% at HKD 74.05, with a turnover of HKD 272 million.
A research report from CICC noted that Shanghai Airport initiated the bidding process for inbound and outbound duty-free shops at Pudong and Hongqiao International Airports on November 17, with the results to be announced on December 9. CTG DUTY-FREE is the most likely bidder, and if it participates through a wholly-owned entity, this could enhance its net profit attributable to shareholders. The company's strengths lie in scale, supply chain, operations, distribution channels, and talent.
In the 2018-2019 bidding for duty-free concessions at Beijing Capital Airport’s T3 and Daxing Airport’s cosmetics and luxury goods sections, CTG DUTY-FREE secured contracts despite not ranking first financially, thanks to high technical scores. It has also gained market share in Hainan’s competitive landscape. Analysts expect the company’s collaborative win-win relationship with brands and airports to continue.
The growth of off-island duty-free sales is accelerating, with potential upside from new policies. Morgan Stanley highlighted that the bidding results for duty-free shops at Shanghai and Beijing airports are expected to be announced this month. Currently, these shops are operated by Sunrise, in which CTG DUTY-FREE holds a 51% stake.
Morgan Stanley outlined several scenarios: - **Base case**: CTG DUTY-FREE wins one contract each in Shanghai and Beijing using its wholly-owned duty-free license, expanding high-margin products offline while offering competitively priced goods on Sunrise’s online platform. In this scenario, the stock price would remain largely stable. - **Bull case**: If the company secures contracts in both airports using both its wholly-owned license and Sunrise’s, the stock could rise 5-10%. - **Bear case**: If Sunrise wins contracts in both airports independently, CTG DUTY-FREE’s stock might drop 5-10%.
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