Don't underestimate Haitang Bay's duty-free sales growth in 2H17    We recently talked to travel agencies and hotel managers in Haitang Bay in Sanya.According to their feedback, traffic growth in Haitang Bay was robust from Julyto September. We estimate duty-free sales in Haitang Bay could reach as highas 50-60% from July to September. While the market seems to be expecting1) potential bidding for duty-free businesses at Shanghai Pudong Airport and2) approval for a downtown duty-free business in Beijing, we believe CITS'sHaitang Bay duty-free sales may surprise to the upside in 2H17as domestic travelmomentum to Sanya is strong. In view of the national holiday (golden week),we expect October duty-free sales to maintain strong momentum. We slightlyrevise up our revenue/earnings forecasts by 4%/1% for 2017and 6%/7% for 2018to reflect the better-than-expected Haitang Bay duty-free sales. Consequently, welift our target price to RMB40, from RMB37previously.    The new Atlantis Sanya Resort should attract more overnight consumers toshop in the Haitang Bay duty-free mall    In the longer term, we believe the strong momentum of Haitang Bay's duty-freesales growth will prevail. The world's third Atlantis Hotel Resort is scheduled toopen at the beginning of 2018. Atlantis Resort is not only a luxury hotel but alsoa water park, located only 2km from the Haitang Bay duty-free shopping mall.We expect Atlantis to attract an incremental 2-3million tourists to the HaitangBay area; we believe Atlantis' entertainment facilities should encourage tourists tostay overnight and these tourists will likely be the key traffic driver for the HaitangBay duty-free shopping mall.    National holiday kicks off with a strong start; Haitang Bay shopping mall sees19.2% visitor growth on first day    According to Sanya tourism statistics, the total number of visitors to the HaitangBay duty-free shopping mall on the first day of the national holiday was 11,951,representing growth of 19.2% yoy vs. only 10k visitors last year (-12% yoy). Hoteloccupancy in the Haitang Bay area also reflects this recovery. The occupancy rateof Haitang Bay hotels is 75%, with an ADR of RMB1,010, representing a rise of15.4%. These data points underpin our view that this should be a year of robustdomestic travel growth, and Sanya is the best proxy for such a recovery.    Catalyst ahead? CITS keeps winning new key airports. What's left?    According to Duty Free Expert news, CITS is the confirmed winner of theoutbound duty free concession (concessionaire rate of 35%) at Guangzhou BaiyunIntl Airport. To recap, CITS won the bidding for inbound duty free with a 42%

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