Shanghai International Airport, the world's fourth-largest listed airport operator by market value, has seen its shares rally despite cooling passenger traffic growth. Now, its duty-free shops hold the key for investors to determine if the stock deserves a valuation premium.

Shares of the operator of the Shanghai Pudong International Airport, the Chinese mainland's second-largest by passengers, have almost doubled since the start of 2017, driven by steady earnings growth. That compares with a 1% drop for the broader Shanghai stock index, and a 51% gain at Hong Kong-traded Beijing Capital International Airport.

Beijing Capital International Airport said in its report that the income growth of the non-aviation sector mainly comes from the growth of duty-free retail business. Income from advertising and catering has also helped to boost the airport's revenue growth.

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