Incident: The company released its 2022 results, achieving revenue of 2,231 million yuan during the reporting period (down 33.3% year on year), of which aviation revenue was 711 million yuan, down 47.1% year on year, and African aviation revenue was 1,520 billion yuan, down 24.1% year on year. The company's net loss after tax was 3,526 billion yuan (loss of 2,116 billion yuan in '21). Losses have increased markedly.
The epidemic has seriously affected the passenger throughput of Capital Airport: the domestic passenger throughput of Capital Airport in '22 was 12.25 million, equivalent to 16.98% of the same period in '19, and 250,000 international passengers, which is only equivalent to 1.1% of the same period in '19. Serious shortfalls in aviation demand have led to a sharp drop in the company's revenue.
The cost side is relatively rigid, and expenses remain high: the company's operating costs in '22 were 5.79 billion yuan, a year-on-year decrease of 4.3%. Although passenger throughput declined significantly during the company's reporting period, the cost reduction was limited due to the high proportion of rigid costs at airports. The decrease in costs is mainly due to an 11.4% year-on-year decrease in repair and maintenance costs, a 7.3% decrease in water and electric power costs, and a 39.5% decrease in franchise entrustment management fees. The more rigid costs, including labor, depreciation, security, etc., have not changed much. Among them, security expenses remained high due to factors such as epidemic prevention and protection for the Winter Olympics. They were flat on year 21 and significantly higher than in 19.
The fundamental inflection point has arrived, and industry demand has steadily recovered: the impact of the epidemic has subsided rapidly after entering 2023.
According to the airline's February operating data, the number of passengers on the company's domestic routes in February recovered to around 56% of the same period in '19. Considering that there is a clear diversion of domestic flights from Daxing Airport to Capital Airport, the current resumption of domestic routes is actually quite smooth.
The recovery on international routes was slightly slow. Passenger throughput in February recovered to about 6% in the same period in '19, but there was a significant improvement compared to the pandemic period last year, and passenger traffic is still increasing rapidly. The number of international travelers will increase further as the flight season changes at the end of March.
The position of an international hub will continue to be strengthened, which will help the development of duty-free business: Capital Airport is clearly diverted by Daxing Airport, but in the long run, it is an opportunity to adjust routes and passenger structures. Since Daxing Airport undertakes a large number of domestic passenger transportation functions, the excess production capacity of the capital airport after being diverted can be more biased towards the expansion of international routes. At that time, the share of international passengers will increase significantly compared to the operation period of a single airport (you can refer to the pattern of Shanghai's two Hongqiao games, mainly from Pudong and outside). This will help strengthen its position as an international hub and facilitate the development of duty-free business.
Profit forecasting and ratings: Although the inflection point of the industry has been determined, demand recovery requires a process. Therefore, we expect the company to achieve a sharp loss reduction this year and turn a loss into a profit next year. We adjusted the company's 23-25 earnings forecast to -332 million, 1,193 million and 1,836 million yuan. The company has strong profit flexibility, its position as an international hub is unshakable, and has excellent commercial value, so we maintain the company's “recommended” rating.
Risk warning: demand recovery falls short of expectations; duty-free sales fall short of expectations; cost increases exceed expectations.