Hainan Duty-Free Sales YoY Growth Slows; Near-Term Stock Momentum May Remain Lukewarm

Overview

This report tracks China Tourism Group Duty Free's sales performance in the Hainan duty-free market, with the core conclusion that YoY growth in open-market sales has decelerated. Although positive growth was still achieved in April, average daily sales declined from approximately RMB80mn in early-to-mid April to roughly RMB66mn from April 22 to 30. Overall, estimated April daily sales averaged around RMB76mn, up ~12% YoY, significantly lower than the 25% YoY growth in March and 26% YoY growth in 2M26.

Core views

Morgan Stanley maintains its Equal-weight rating and In-Line industry view on 1880.HK. The report suggests that if sales do not recover during the remainder of the May 1–5 Labor Day holiday, near-term stock momentum may remain lukewarm, despite a 30%–40% share price correction since mid-February. Medium- to long-term drivers still depend on the recovery of the Hainan travel retail market, policy support, and margin expansion, but growth sources remain concentrated in the Hainan business, indicating insufficient diversification.

Analysis framework

The report utilizes high-frequency Hainan duty-free sales tracking, traffic and average ticket size breakdowns, YoY growth comparisons, and a valuation multiple framework to form its assessment. It also incorporates Morgan Stanley ModelWare earnings forecasts, Refinitiv consensus estimates, and historical target price/rating records to evaluate potential share price upside.

Methodology notes

• Valuation methodsP/E valuation with H-share discount

  P/E Valuation with H-Share Discount

  The report applies a 15% discount to A-share valuation for H-share valuation, implying a 2026E P/E of approximately 27x, compared to a target A-share valuation of 32x 2026E P/E.

• fundamental_modelMorgan Stanley ModelWare

  Morgan Stanley ModelWare Forecasts

  Unless otherwise specified, metrics such as earnings, revenue, EBITDA, net profit, and valuation multiples are based on the Morgan Stanley ModelWare model.

• market_trackingHainan duty-free sales tracker

  High-Frequency Hainan Duty-Free Sales Tracking

  The report tracks changes in Hainan duty-free demand using sales volume, number of shoppers, average spending per person, and average daily sales, comparing YoY growth rates across April, March, and 2M26.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China Tourism Group Duty Free (1880.HK)

  Core coverage, H-shares

  Strengths

  Hainan duty-free business offers resilience via policy support and travel retail recovery; target price implies ~21% upside from current levels.

  Weaknesses

  Growth drivers concentrated in Hainan business; asset-heavy model with lower ROE; insufficient business diversification.

  Comparison

  H-share valuation carries a 15% discount relative to A-shares, implying a 2026E P/E of ~27x; A-share target P/E is 32x.

  Risks

  Continued deceleration in sales growth, weak consumption, channel price competition, and intensified competition from further opening of the duty-free market.

• China Tourism Group Duty Free (601888.SS)

  A-share mapping for the same company

  Strengths

  A-share valuation serves as an anchor for H-share valuation; benefits from expectations of healthy growth in the Hainan travel retail market and margin expansion.

  Weaknesses

  Valuation requirements are relatively high; earnings recovery is sensitive to improvements in the Hainan business.

  Comparison

  The report uses a 32x 2026E P/E as the A-share target valuation, approximately one standard deviation above the mean since 2017.

  Risks

  Macro slowdown, disposable income pressure, intensified competition, and policy outcomes falling short of expectations.

Key data

• May 1 Hainan Duty-Free SalesRMB96mn, +4.3% YoYDriven by 17,200 shoppers and average spending of RMB5,600 per person.
• May 1 Shopper Count17,200, +3.6% YoYTraffic growth was one of the primary contributors to sales growth on the day.
• May 1 Average Spending Per PersonRMB5,600, +0.7% YoYAverage ticket size saw only marginal growth.
• Apr 22–30 Hainan Duty-Free SalesRMB595mn, approx. RMB66mn/dayLower than the approx. RMB80mn/day recorded from Apr 1–19.
• Estimated April Average Daily SalesApprox. RMB76mn/day, +~12% YoYSignificant deceleration vs. 25% YoY growth in March and 26% YoY growth in 2M26.
• 1880.HK Target PriceHK$77.00Implies approx. 21% upside from the Apr 30 closing price of HK$63.45.
• 1880.HK Apr 30 Closing PriceHK$63.4552-week range: HK$107.00 to HK$48.30.
• 2026E EPSRMB2.52Based on Morgan Stanley estimates.
• 2026E P/E22.0x2026E valuation multiple disclosed in table.
• 2026E RevenueRMB54.849bnNet revenue forecast disclosed in report table.

Impact & implications

Slowing sales growth reduces near-term visibility on the Hainan duty-free recovery, potentially limiting the rebound potential for 1880.HK following its significant correction. If data improves over the remainder of the Labor Day holiday, the market may reassess the recovery of the Hainan business and margin expansion; however, if traffic or average spending remains weak, valuation repair could face pressure.

Risks

• Macroeconomic slowdown and pressure on disposable income.
• Price competition among different retail channels.
• Intensified competition if the government further opens the Hainan and mainland duty-free markets.
• Near-term stock momentum may remain lukewarm if sales do not recover during the remainder of the Labor Day holiday.
• Growth drivers concentrated in the Hainan business; insufficient business diversification.

What to watch

• Whether Hainan duty-free sales recover during the May 1–5 Labor Day holiday.
• Whether Hainan duty-free average daily sales can return to or exceed the ~RMB80mn/day level seen in early-to-mid April.
• Subsequent trends in traffic and average spending per person, particularly upgrades in cosmetics and non-cosmetics luxury consumption.
• Policy outcomes related to the Hainan Free Trade Port and downtown duty-free shops.
• Channel price competition and the pace of duty-free market liberalization.
• Delivery on 2026 revenue, EPS, EBITDA, and margin expansion targets.