China Tourism Group Duty Free Shares Soar as Agreements Lower Airport Fees

China Tourism Group Duty Free shares surged after the company reached agreements to reduce fees paid to airports in Beijing and Shanghai. The Hong Kong-listed shares of the duty-free retailer closed 11% higher at HK$76.35 (US$9.78), marking their largest record percentage gain. Meanwhile, the company's mainland China-listed shares ended 8.5% higher at ¥85.02 (US$11.91), its largest daily gain since November 2022.

The Beijing-based company recently signed supplemental agreements with the operators of Beijing Capital International Airport, Shanghai Pudong International Airport, and Shanghai Hongqiao International Airport. According to company filings on Wednesday, these agreements modify the calculation of fees paid by China Tourism Duty Free to the airports.

Under the new agreements, the fees paid will now depend on whichever is higher between the guaranteed sales commission and the actual sales commission effective from December 1st. This change provides relief for China Tourism Group Duty Free by reducing its rental pressure, especially since international passenger traffic is gradually recovering after the pandemic.

Analysts Wenhui Deng and Jing Cao from Guolian Securities estimated the company's annual rent at ¥710 million for the Shanghai airports and ¥560 million for Beijing Capital Airport. They noted that these figures are significantly lower than the pre-pandemic rent levels of around ¥3.5 billion for Shanghai Pudong Airport and approximately ¥3 billion for Beijing Capital Airport.

This development highlights China Tourism Group Duty Free's ability to negotiate prices with its supply chain partners, which in turn helps alleviate rental pressure during uncertain times. Guang Zeng and Xiao Zhong from Guosen Securities emphasized this point in a note.