Bank of America Securities raises the target price for CTG DUTY-FREE to RMB 95, maintaining a "Neutral" rating

Bank of America Securities pointed out that the duty-free sales of China Tourism Group Duty Free Corporation (601888.SH) in Hainan will turn to positive growth starting from September 2025. Subsequently, in October, November of last year, and from December 18 to 24, as well as from January 1 to 4 this year, the sales growth further improved to 13%, 27%, 55%, and 129%, respectively. It is expected that this momentum will continue this year, with annual sales growth expected to reach 20%. However, due to the uncertainty of profit margin recovery and high valuations, the stock is maintained at a "neutral" rating, with the target price raised by 34% to RMB 95.

In terms of earnings, the bank has lowered its profit forecasts for 2025 and 2026, expecting a net profit of RMB 3.752 billion in 2025, a year-on-year decline of 9.5%; and a rebound to RMB 5.587 billion in 2026, a year-on-year growth of 48.9%. The earnings per share forecasts are RMB 1.81 and RMB 2.70, respectively.

The report mentioned that sales growth is mainly driven by the recovery of luxury goods, policy easing, and promotional activities, but promotions affect the speed of profit margin recovery. The target price-to-earnings ratio has been raised to 35 times, but the bank believes that the current valuation already reflects growth expectations, lacking further upside potential