招银国际-中国中免-601888-A weak 3Q on Sanya’s lockdown; resilient online sales made up the gap but unavoidab

　　中国中免(601888)
　　Sanya’s lockdown weighed on CTGDF’s 3Q results as we expected,with recurring net profits standing at RMB656mn, down ~45%, as weexclude non-core Beijing airport rental concession and Hainan tax cut impact.Despite this, revenue of the quarter rose 8% QoQ to RMB11.7bn, whenonline sales with Sunrise Shanghai made up most of the offline hiccups. Thechange in sales mix also led to an almost 10pp/11pp QoQ decline in GPM/OPM to 24.7%/ 12.5%, respectively.
　　Key takeaways from management calls.
　　1) Forex impact: management has taken a few initiatives to mitigate theadverse impact from a strengthening USD (against RMB). This includesenriching forex reserves, extending payments (dominated in foreigncurrencies), and cost sharing with suppliers.
　　2) Synergy with Swire Property: A piece of land was jointly acquired for theexpansion of Haitang Bay Phase 1, and both CTGDF and Swire will workout the expansion of Haitang Bay Phase 2&3 together.
　　3) The opening of the Haikou DFS mall on 28 Oct: with a total of 280k sq m,the mall covers 800+ global luxury brands and 25 of them, including YSL,Prada, Burberry, BV, Moncler, etc., had their first footstep in Hainan. On theother hand, according to our survey, customer could enjoy 20% for every 2cosmetic items purchased. For other popular brands like Shisedo, La Mer,Dior, discount ranges from 28-32% off MSRP.
　　Earnings change. To reflect the 3Q results, we cut our 2022/23E revenueby 16.6%/ 23.8%, GPM by 1.6/0.9pp, leading to an average 23% cut in netprofits for the periods. Our current forecast implies 4Q22E revenue/ netprofits to be RMB17.7bn/2.2bn, with a 37% GPM, barring any unexpectedlockdown for the quarter. For now, we assume Hainan will generateRMB54bn/75bn sales from duty-free operators (DF plus non-DF) in 2022/23and CTGDF will share ~80%/~77% of it.
　　Valuation. Our revised TP is based on an unchanged 45.0x roll-forwardend-23E P/E which still represents 2-year average since 2020.