1. The tax-free policy dividend of Hainan outlying island is released, and the tax-free sales of the whole island are growing at a super high speed.
According to data released by Haikou Customs, the total duty-free sales of 2021H1 in Hainan outlying islands reached 26.81 billion yuan, an increase of 257.8 percent over the same period last year, while the total number of duty-free shopping trips reached 3.827 million, an increase of 156.7 percent over the same period last year. With the support of the unprecedented free trade port policy, the current duty-free sales in Hainan are still in a period of rapid growth. As the air gateway of Hainan Free Trade Port, the company monopolizes the high-end traffic in Haikou area, fully enjoys the tax-free growth dividend, and comprehensively considers the influence of factors such as the diversion of stores in the city and the rebound of local epidemic situation. It is expected that the company's tax-free sales in the first half of the year will still be able to achieve high growth compared with the same period last year.
2. The company is expected to be selected into the Hang Seng Composite small cap index in August, and then enter the Shenzhen-Hong Kong Stock Connect in September, when liquidity will be greatly improved. According to the Hang Seng Index company announcement, it will release the results of the review of the Hang Seng Composite Index on August 20, which will take effect on September 6. Among them, stocks with a market capitalization of more than HK $5 billion and newly selected into the Hang Seng Composite small caps Index (HSCI) will then enter the Shenzhen Stock Exchange. The selection criteria of Hang Seng Composite small cap index include: (1) current market value; (2) trading volume; (3) equity concentration and so on. Meilan Airport from the end of June 2020 to the end of June 2021, the average monthly market value of 12 companies is HK $8.081 billion, which has met or even greatly exceeded the standard of market value in circulation, and the companies with indicators such as trading volume and equity concentration have also met the conditions. therefore, the company will most likely enter the Shenzhen-Hong Kong Stock Connect in September, when liquidity will be greatly improved, helping to repair the valuation.
3. The core assets of Hainan Free Trade Port have both high growth and high certainty. With the capping of the new tower project, the second phase of the company will be officially put into production in the second half of this year, alleviating the capacity bottleneck, and the next 3-5 years will be the golden growth period for the company's passenger flow and tax-free business. Under neutral expectations, the passenger volume of Meilan Airport is expected to grow to 45 million (CAGR15%) in 2025, and tax-free sales will increase to about 10 billion yuan.
At the same time, with the substantial progress of the bankruptcy restructuring of HNA Group, the debt risk of the parent company is gradually clear, the airport system is nationalized, and the problem of suppressing the valuation of the company for many years will no longer exist.
4. Investment suggestions: it is estimated that the total operating income of the company from 2021 to 2023 is 1.888 billion yuan, 2.257 billion yuan and 2.621 billion yuan respectively, the net profit is 698 million yuan, 660 million yuan and 914 million yuan respectively, and the corresponding PE is 18.63,19.69,14.21 respectively. The current value continues to be undervalued and the "highly recommended" rating is maintained.
Risk tips: short-term liquidity risk, tax-free sales growth is not as expected, the second outbreak of the domestic epidemic, the second phase of the expansion project is not as expected.