Zhongshan China Duty Free Group (01880) is now down more than 5%, as of press time, it fell 5.15%, reported 51.55 Hong Kong dollars, turnover 61.9734 million Hong Kong dollars.
According to a research report released by Daiwa, the physical store duty-free sales in Hainan from April to May are worse than the bank's expectations earlier in May. The bank predicts that the overall duty-free sales in Hainan will reach 50 billion yuan, while the overall retail sales of tourism in the mainland will be roughly the same as last year. Daiwa predicts that China Duty Free's revenue decline will further widen to a 13% year-on-year decline in the second quarter of this year, but the company's operating gross margin is expected to continue to expand to 12.6% in the second quarter as the increase in gross margin and the decrease in sales expenses offset some of the operating leverage.
In addition, the recent consumption tax reform has received much attention. Analysts pointed out that if tax rate changes are not considered, the price difference between duty-free and taxable goods will widen, making duty-free shops more attractive to consumers. However, Daiwa believes that the Third Plenary Session of the Eighth Central Committee will not raise tax rates, as it will neither stimulate the economy nor reform the income gap of local governments.