Core viewpoints
In 2016, the revenue of 40.678 billion yuan increased by 15.48%, the operating cost of 31.36 billion yuan increased by 21.76%, the net profit of 3.138 billion yuan increased by 4.50%, the net profit of non-return to mother increased by 2.303 billion yuan and 4.40% per share, and non-post-EPS:0.149 yuan per share.
Passenger transport increased by 15.49% with volume premium, and high quality management ensured high occupancy rate. During the reporting period, the company's overall ASK increased by 25.73% compared with the same period last year, while domestic / international increases by 19.73% and 57.36%. Overall RPK increased by 25.23% compared with the same period last year, while domestic / domestic growth was 20.16% and 55.05% respectively. The overall occupancy rate for the whole year remained 87.83%, with a slight decrease in 0.36pct compared with the same period last year, with the same increase in domestic 0.33pct and the same decrease in 1.19pct internationally. At the income end, domestic / international prices are paid by volume, and the domestic aviation market has shown relatively prominent structural differences in the past 16 years. The second and third tier markets are under pressure due to short-term transport capacity. Internationally, as a large number of new routes are still in the development period, the company adopts the strategy of price reduction to attract passenger flow. During the reporting period, the company realized domestic and international passenger kilometer income of 0.47 yuan (- 6.68%) and 0.41 yuan (- 13.77%) respectively. Passenger transport revenue for the whole year reached 37.033 billion yuan, an increase of 15.49 percent over the same period last year.
The oil price dividend greatly reduces the aviation fuel cost, and the non-oil cost is comparable to the increase in transport capacity.
The average kerosene price of Singapore Airlines fell 18.12 per cent in 2016 compared with the same period last year, and the cost of aviation fuel per unit of the company fell 16.12 per cent from the same period last year. Although the year-on-year ASK increased by 25.73 per cent, the total aviation fuel cost increased by only 5.46 per cent. With the expansion of the business fleet, the salaries of employees, take-off and landing services, and aircraft maintenance costs increased by 30.59%, 28.91% and 24.45%, respectively. During the reporting period, the company generated operating costs of 31.36 billion yuan, an increase of 1.62% over the same period last year, of which non-aviation oil costs increased by 28.39%, which basically matched the growth rate of transport capacity.
Debt structure continues to be optimized, interest payments reduce hedging incremental exchange losses
The company continues to optimize its debt structure. at present, the company's US dollar debt is 28.25 billion yuan, 4.21 billion yuan less than 32.46 billion yuan in 2016. For every 5% depreciation of RMB against the US dollar at the end of the reporting period, the company's net profit decreased by 1.114 billion yuan (1.469 billion yuan in mid-2016). Exposure is shrinking. In 16 years, the RMB depreciated by 6.83% against the US dollar, resulting in an exchange loss of 2.141 billion yuan, an increase of 334 million yuan compared with the same period last year. Excluding the impact of foreign exchange, the company's operating profit increased by 6.28%.
During the reporting period, the company's interest-bearing liabilities decreased significantly, and the annual interest expenditure decreased by 469 million yuan compared with the same period last year. The straightening and lowering belt will continue to move forward, and the agency fee will be reduced by 411 million yuan.
Over the past 16 years, the company has further implemented the "promotion and reduction", and the air ticket business agency fees have been reduced by 411 million, a year-on-year drop of 35.19%. In the context of a substantial increase in business volume, the annual sales expenses have also been reduced by 10.37%.
Investment suggestion
We expect the company's EPS in 17-18 to be 0.22,0.25,0.28, corresponding to PE:15.5x, 13.8x and 12.2x, maintaining a "buy" rating.
Risk hint
Aviation demand fell short of expectations, RMB depreciated sharply, and oil prices rose sharply.
