Research Update: China Tourism Group Corp. Ltd. And Hong Kong Subsidiary Outlook Revised To Negative; 'A-' Ratings Affirmed

China Tourism Group Corp. Ltd.'s (CTG) duty-free retailing business in Hainan province is showing less resilience than we expected. This results in a greater impact of weak discretionary spending, and slower recovery prospects than we anticipated. Meanwhile, the company's desire to maintain high spending, and uncertainty around concession fees could hinder its deleveraging. We therefore revised our rating outlook on CTG and its subsidiary China Travel Service (Holdings) Hong Kong Ltd. (CTS HK) to negative from stable. We affirmed our 'A-' long-term issuer and issue credit ratings on the companies and on CTS HK's outstanding guaranteed debt. The negative rating outlook reflects the likelihood that CTG's Hainan business could face further downside over the next 12-18 months. Our base case

...- China Tourism Group Corp. Ltd.'s (CTG) duty-free retailing business in Hainan province is showing less resilience than we expected. This results in a greater impact of weak discretionary spending, and slower recovery prospects than we anticipated. - Meanwhile, the company's desire to maintain high spending, and uncertainty around concession fees could hinder its deleveraging. - We therefore revised our rating outlook on CTG and its subsidiary China Travel Service (Holdings) Hong Kong Ltd. (CTS HK) to negative from stable. We affirmed our 'A-' long-term issuer and issue credit ratings on the companies and on CTS HK's outstanding guaranteed debt. - The negative rating outlook reflects the likelihood that CTG's Hainan business could face further downside over the next 12-18 months. Our base case expects Hainan's pace of sales decline to ease in the coming months, and sales will stabilize in 2025. This could lower CTG's leverage to less than 3.0x in 2024, from 3.1x in 2023....

Research Update