CITS Alert:Sep and Oct 2016duty free sales up 38.4%yoy and 13.7%yoy

At the end of 2016, the Ministry of Commerce (MOFCOM) released October’sHainan duty free sales (Sanya + Haikou). September and October 2016 dutyfree sales growth were 38.4% yoy and 13.7% yoy, respectivelyBased on MOFCOM data, 10M16 duty free sales grew 6.4% yoy toRMB4.76bn, and number of customers increased 2.6% yoy to 1.38m. Thisimplies a 3.7% yoy expansion in ticket price to RMB3,446.

    As CITS resumes the rebate to local travel agencies in May and June 2016,we believe sales growth will rebound in 4Q16. As we can see in the chartbelow, sales in October showed strong rebound from flattish 3Q andnegative yoy 2Q.

    We also believe 3Q16 duty free sales recovered to be flat yoy from anegative level in 2Q16 because rebate started to work.