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.
WHAT’S NEW
• 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.
