The 2022 results are in line with the performance forecast
The company announced its 2022 results: revenue of 2,231 billion yuan, a year-on-year decrease of 33%; net loss of 3,527 billion yuan (vs. net loss of 2,117 billion yuan in 2021), in line with the company's previous performance forecast (loss of 3.5 to 3.6 billion yuan). 2H22 achieved revenue of 1,130 billion yuan, a year-on-year decrease of 29% and an increase of 3% over the previous month; net loss was 2.222 billion yuan (vs. 2H21 net loss of 1,276 million yuan, 1H22 net loss of 1,405 million yuan).
The Board is not recommending a 2022 dividend.
Due to the pandemic, 2H22 revenue declined sharply year over year. Among them, the airline business 2H22 achieved revenue of 362 million yuan, a year-on-year decrease of 44%; affected by the COVID-19 pandemic, the company's 2H22 take-off and landing flights and passenger throughput fell 50% and 41%, respectively. Revenue from non-aviation business 2H22 was 768 million yuan, down 19% from the previous year. The decline was less than production volume, mainly due to the relatively small decline in rent and advertising franchise revenue (down 16% and 30%, respectively); retail revenue of 2H22 was 42 million yuan, an increase of 25% over the previous year, mainly due to the company's allocation and confirmation of part of the franchise revenue in accordance with the duty-free supplementary agreement signed in the second half of 2021.
There was a slight decline on the cost side of 2H22. The operating cost of 2H22 fell 7% year on year, and after deducting the impact of franchise management fees, other operating costs fell 6% year on year. Among them, maintenance costs fell 16% year on year, mainly because most housing and building repair projects were completed in the previous year, and aviation security costs and hydroelectric power fell 13% and 10%, respectively.
Development trends
International passenger traffic is recovering steadily, so keep an eye on the trend of duty-free contracts. In the first two months of this year, the passenger throughput of Capital Airport increased by about 88.9% year on year. International routes benefited from the continuous liberalization of travel restrictions and the continued strengthening of international mobility. The number of international passengers increased by about 274.1% year on year, recovering to 7% in the same period in 2019. We expect international flights in the entire industry to recover to 40% and 90% of 2019 respectively in 2023 and 2024, while we expect Daxing to divert 24% of international passengers from the capital. The company has yet to determine the form of tax-free rent collection for future years. We believe there is a possibility that there will be no major changes to the main terms of the company's future contracts, mainly based on the current steady recovery of international travel and the mainstream practices of overseas airports.
Profit forecasting and valuation
We kept our net profit of $0.57 billion and $1,829 million unchanged in 2023 and 2024. The current stock price corresponds to 12.4 times the price-earnings ratio of 2024. Maintaining an outperforming industry rating, we maintain our target price of HK$8.3 (corresponding to about 18 times the P/E in 2024), which has 37% room to rise from the current stock price.
risks
The process of liberalizing international flights fell short of expectations, the impact of Daxing's international flight transfers was higher than expected, competition for duty-free channels worsened, related transaction costs increased more than expected, and the capital expenditure process or quota exceeded expectations.