Upbeat On Improving External Environment; Maintain CTGDF As Top Pick
We reiterate that more optimised pandemic containment policies are likely to be rolled out in the following months as: a) we have observed relaxations in transport policies, and b) there have been media reports on the mild and temporary after-effects of contracting COVID-19. We expect an improving external environment and continuous recovery in residents’ disposable income in the future. Maintain CTGDF as our top pick among consumer names. Maintain OVERWEIGHT on China’s consumer sector.
• National RSV up 2.5%/0.7% yoy in Sep 22/9M22 (vs 5.4%/0.5% yoy in Aug22/8M22). In Sep 22/9M22, merchandise retail sales value (RSV) was up 3%/1.3% yoy (vs +5.1%/+1.1% yoy in Aug22/8M22). Among this, tobacco & liquor had a change of – 8.8%/+4.7% yoy (vs +8.0%/+7.0% yoy in Aug 22/8M22), while garments, footwear, hats & knitwear dropped -0.5%/-4.0% yoy (vs +5.1%/-4.4% in Aug 22/8M22). Catering services RSV was down 1.7%/4.6% yoy in Sep 22/9M22 (vs +8.4%/-5% yoy in Aug 22/8M22).
• Disposable income growth recovered in 3Q22. China’s per capita nominal disposable income was up 5.3% yoy (3.2% yoy in real terms) in 9M22 (vs 1H22’s 4.7%/3.2% yoy growth in nominal/real terms), of which the urban/rural per capita nominal disposable income was up 4.3%/6.4% yoy (2.3%/4.3% yoy in real terms). The national per capita nominal expenditure on clothes dropped 1.1% yoy in 9M22 (vs -2.3% yoy in 8M22), whereas the urban area/rural areas per capita spending on clothes had a change of – 3.3%/+3.5% yoy in 9M22 (vs -4.8%/+3.0% yoy in 8M22).
• Duty-free (maintain OVERWEIGHT). Last week, the daily average number of flights in Sanya Phoenix Airport was 195 (+13.8% wow), while that of Haikou Meilan Airport was 230 (+4.7% wow). On 26 Oct 22, Hainan Development Holdings-owned Global Premiere Duty Free (GDF) Plaza unveiled its Phase three development (operating area: 6,250 sqm) located at the east section of Mova Mall. During the grand opening (28 Oct 22) of Haikou International Duty-Free Mall, CTGDF’s online stores achieved Rmb500m sales with 120,000 online shoppers.
• Sportswear (maintain OVERWEIGHT). Last week, cotton and polyester filament yarn (PFY) prices saw -2.4%/-5.3% wow changes. Sketchers’ 3Q22 revenue in Greater China declined 18.5% yoy to US$227m. Top Sports’ 1HFY22 revenue (ending 31 Aug 22) fell 15.1% yoy to Rmb13.2b, but gross margin rose 1.1ppt yoy to 45.6%. Its number of direct sales stores and employees fell to 6,928 (-11% yoy) and 32,000 (-8,000 yoy) respectively.