CICC has released a research report stating that the current share price of Beijing Capital Airport Co., Ltd. (00694) corresponds to a price-to-book ratio of 0.8x for 2026. The firm maintains its target price of HK$2.9, based on a 0.9x 2026 P/B ratio, implying a 10% upside from the current share price, and reiterates its Outperform industry rating. The main views of CICC are as follows: The company recently released its full-year 2025 operational data. According to the listed company bid-winning announcements issued by China Duty-Free Group and Wangfujing Group at the end of December 2025, Beijing Capital Airport has completed the signing of a new round of duty-free contracts. Commentary: Passenger traffic growth in 2025 was slightly lower than the national average; focus on future slot capacity increases. In 2025, the company's passenger traffic increased by 5.0% year-on-year, with domestic traffic essentially flat and international traffic growing 11% year-on-year; this compares to a 5.5% year-on-year increase in passenger traffic for China's civil aviation industry. The company's operational data performance was slightly weaker, which the report attributes primarily to competition from Beijing Daxing International Airport and the relatively saturated slot capacity. The report suggests monitoring the company's slot capacity increases in 2026. New duty-free contracts have been finalized, introducing dual duty-free operators. Statically viewing, the duty-free rental level is higher than the previous contract; focus will be on sales improvement under the "guaranteed minimum + percentage of sales" model. According to announcements from China Duty-Free Group and Wangfujing Group, this round of duty-free contracts will run from the later of February 11, 2026, or the handover date, until February 10, 2034. China Duty-Free Group and Wangfujing Group won the bids for Terminal 3 and Terminal 2, respectively. Regarding rent, the new agreement adopts a "guaranteed minimum + percentage of sales" model. The first-year guaranteed minimum is RMB 590 million (compared to RMB 560 million per year under the original contract), with subsequent years' minimums adjusted based on the annual change in passenger traffic. The first-year sales percentage rate is 5%. From the second billing year onwards, the percentage rate increases by 1 percentage point annually, ceasing to increase from the fifth billing year. Assuming an airport duty-free per-customer spend of RMB 160 in 2025 and a comprehensive commission rate of 24% under the original agreement, the report calculates that the rent under the new agreement is approximately 10% higher than the level of the original agreement under static conditions. Although the elasticity of rent to sales has decreased, the report believes that compared to the "higher of guaranteed minimum or percentage" format, the new rental model may be more conducive to incentivizing duty-free operators to expand sales scale. Considering that Shanghai and several other domestic airports operate airport duty-free shops through joint ventures with duty-free operators, it is recommended to monitor the company's progress regarding this model. Profit Forecast and Valuation: The report has lowered its profit forecasts for 2025 and 2026 to a loss of RMB 308 million and a profit of RMB 122 million, respectively (previous values were a loss of RMB 237 million and a profit of RMB 159 million), mainly due to downward revisions to passenger traffic growth assumptions. The report introduces a 2027 profit forecast of RMB 458 million, based on key assumptions including a 5% year-on-year increase in passenger traffic and a mid-to-high single-digit percentage growth in duty-free per-customer spend. Risk warnings: Passenger traffic performance falling short of expectations; duty-free sales performance falling below expectations.
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