Morgan Stanley maintains "market perform" rating for China Tourism Group Duty Free Corporation (01880) with target price lowered to 60 Hong Kong dollars.

Morgan Stanley has released a research report stating that it has lowered the target price of China Tourism Group Duty Free Corporation (01880) from HK$85 to HK$60. The income forecast for 2024 and 2025 has been reduced by 13% to 14%, and the net profit forecast has been lowered by 6% to 14%, with a forecast of net profit of 1.3 billion RMB for this year, maintaining a "Market Perform" rating. The report mentioned that the physical duty-free sales in Hainan in May were worse than expected by the bank in early May. It is currently estimated that the overall duty-free sales in Hainan will reach 50 billion RMB, while mainland China's overall tourism retail sales will remain roughly flat this year. The bank believes that the mainland will not raise tax rates at the Third Plenum, as it cannot stimulate the economy and will not reform the income gap for local governments. The bank estimates that China Tourism Group Duty Free Corporation's revenue decline in the second quarter of this year will further widen to a 13% year-on-year drop. However, the bank also believes that the company's operating gross profit will continue to expand to 12.6% in the second quarter, as the rise in gross profit margin and the decrease in selling expenses offset some of the operating leverage.