Luzhou laojiao Co., Ltd. ("Luzhou Laojiao", 000568) is clear about its investment in the H-share offering of China Tourism Group China exemption Co., Ltd. ("China exemption", 601888).

July twenty _ ninth$Luzhou laojiao (000568.SZ) $The "announcement of resolutions of the 19th meeting of the 10th Board of Directors" was issued, indicating that the board of directors of the company unanimously approved the "motion on investment in the issuance of H shares of China Tourism Group China exemption Co., Ltd.".

According to the announcement, Luzhou laojiao plans to invest US $80 million (including brokerage commissions, transaction fees and other related fees) as a cornerstone investor to subscribe.China waiver (temporary code) (810163.HK) $Overseas listed foreign capital shares (H shares) issued.

However, the announcement further pointed out that the above investment has yet to be formally signed and the listing has yet to be finally approved by the relevant regulatory authorities.

On June 30 this year, China exemption submitted an application to the Stock Exchange of Hong Kong Limited for listing on the main board of the Stock Exchange.

On November 22, 2021, China China exemption passed a listing hearing for the first time, according to HKEx filings. However, on the occasion of the "door-to-door kick", China China exemption issued a notice in A-shares saying that due to the influence of factors such as the COVID-19 epidemic, the global economy had been greatly affected, the capital market remained in the doldrums, and the company decided to suspend the process of this H-share offering and listing, and the follow-up arrangements were determined according to market conditions.

According to the prospectus, China exemption was established in 1984. China Duty Free (Group) Co., Ltd., formerly known as China Duty Free Company, is the only state-owned franchise company authorized by the State Council to carry out duty-free business nationwide.

In 2004, the State Council approved the strategic reorganization of China exemption Group and China International Travel Service to jointly establish China Travel Service Group Co., Ltd. (the predecessor of China International Travel Service). It has become the only central enterprise subordinate to the State-owned assets Supervision and Administration Commission of the State Council with tourism and tax exemption as its main business.

In October 2009, China exemption was listed on the main board of the Shanghai Stock Exchange. According to the prospectus, China exemption has become the world's largest tourism retail operator.

China exemption occupies the core channel of duty-free sales on Hainan outlying islands, including Haikou Meilan International Airport, Sanya Phoenix International Airport, the urban core areas of Haikou and Sanya, and the Boao Forum for Asia area. It also has franchises to operate duty-free shops in major aviation hubs in China and the Asia-Pacific region, including Beijing Capital International Airport, Shanghai Pudong International Airport and Guangzhou Baiyun International Airport.

In March 2017, China exemption Group acquired a 51 per cent stake in Rishang tax Free Group Co., Ltd for 38.8 million yuan. In February 2018, China exemption Group spent 1.5 billion yuan to acquire a 51% stake in Shanghai tax Free Bank (Shanghai) Co., Ltd. In May 2020, CITS spent 2.065 billion yuan to acquire a 51 per cent stake in Hainan Duty Free goods Co., Ltd.

In June 2020, the full name of China Travel Service was changed to China Tourism Group China exemption Co., Ltd.; at the same time, the original securities abbreviation "China Travel Service" was also changed to "China exemption".

In terms of performance, the prospectus shows that China's exempted income and net profit declined in the first quarter of this year compared with the same period last year. In the first quarter of 2021 and the first quarter of 2022, China's exempted income was 18.134 billion yuan and 16.782 billion yuan respectively, and the net profit was 3.428 billion yuan and 2.934 billion yuan respectively.

In 2019, 2020 and 2021, the medium and exempt income in China was 48.013 billion yuan, 52.598 billion yuan and 67.676 billion yuan respectively, and the net profit was 5.471 billion yuan, 7.109 billion yuan and 12.441 billion yuan respectively. From 2019 to 2021, China's exemption income grew at a compound annual growth rate of 18.7%, while net profit grew at a compound annual growth rate of 50.8%.

China exemption is regarded as one of the important concept stocks in Hainan Free Trade Zone. Since the state put forward the plan of Hainan free trade port in 2020, the duty-free market on outlying islands has also become a key development direction, and has developed rapidly in recent years. The market size has increased from 8 billion yuan in 2017 to 13.5 billion yuan in 2019, with a compound annual growth rate of 29.7 percent.

With the epidemic under control at home, coupled with policies to encourage the duty-free market and expand consumption, sales of duty-free shops on China's outlying islands have increased sharply, with sales revenue reaching 45.2 billion yuan in 2021 and a compound growth rate of 83 per cent from 2019 to 2021. It is estimated that the market size of duty-free goods on China's outlying islands will be 56.7 billion yuan in 2022, and is expected to reach 243.2 billion yuan by 2026, with a compound annual growth rate of 32.8% from 2023 to 2026.

With a market share of 86 per cent of retail sales in 2021, China China Free is the largest player in China's duty-free goods market on outlying islands. And this time, through the listing of Hong Kong shares, the company is expected to raise funds to invest in about 8 airport duty-free shops, about 20 port duty-free shops, 20 tax-free tourism retail projects, 6 overseas and 11 local city duty-free shops, Haikou duty-free city construction and Haitangwan duty-free city expansion, at the same time, the company is expected to selectively acquire 2-3 overseas retail operators to strengthen its own channels and international supply chain system. Among them, Haikou International duty-free city is expected to open for business on September 30, 2022, positioning itself as the largest high-end duty-free consumer mall in the world, with passenger flow focusing on high-power groups.

With the opening of Haikou new seaport duty-free city in 2022, the increment of Haikou tax exemption is released, the performance of Haikou exemption is also expected to be guaranteed, and the position is expected to remain stable. Although new players enter, the scale of new players is not large, and will promote healthy competition in the industry.

Generally speaking, although the original duty-free business mainly takes the license plate as the main moat, with the gradual liberalization of China's tax exemption policy, the number of enterprises with tax-free license plates is increasing, but the number of new entrants is relatively small and the network is limited. in the short term, the impact on exemption is limited. In addition, in order to consolidate the company's leading position, China exemption is also actively expanding, with the subsequent opening of several duty-free shops, the company's performance is also expected to be guaranteed. However, in the long run, the competitors of the duty-free industry are increasing, with the increase of the scale of other competitors, the competitive pressure of exemption is also gradually increasing, and finally the competitiveness of the tax-free industry will be in the supply chain capacity.