Event
HNA Holdings announced its 2017 annual report that the company achieved operating income of 59.9 billion yuan in 2017, an increase of 47.3% over the same period last year, and a net profit of 3.32 billion yuan, an increase of 5.9% over the same period last year.
Endogenesis and extension expand, income scale increases greatly
In 2017, the company introduced 78 aircraft, withdrew 7 passenger aircraft, superimposed and listed Tianjin Airlines and Beibu Gulf Airlines, and the fleet increased significantly to 410 from 238 disclosed in the 2016 annual report. As a result, the company's annual ASK growth rate reached 49.1%, the growth rate of RPK was 46.1%, and the passenger volume was 761.9, an increase of 52.5% over the same period last year. The gap between Air China, which ranks third in passenger throughput, narrowed to 25%. In terms of revenue quality, the annual passenger kilometer income increased slightly by 2.2% to 0.455 yuan, driving the annual income growth rate by nearly 50% to 47.3%.
Higher oil prices, higher costs affect gross margins, and exchange gains significantly reduce financial expenses
In 2017, the average price of oil distribution increased by 21% over the same period last year, the cost of aviation fuel per unit ASK increased by 24.6%, and the cost of aviation fuel reached 14.59 billion yuan, which greatly increased by 85.7% compared with the same period last year, resulting in a certain cost pressure. as a result, the company's annual gross profit margin was 13.5%, down 9.4bps from the same period last year, but thanks to the appreciation of the RMB against the US dollar, the exchange gain was 2.095 billion, and the financial expenses decreased significantly compared with the same period last year. The financial expense rate was only 3.5%, a sharp drop in 7.6bps compared with the same period last year. Taken together, the company's net profit margin was 6.5% in 2017, down 1.9bps from a year earlier, but net profit grew positively to 13.8%, thanks to a significant increase in the size of the business.
Slow down and set sail after a nap
Facing the pressure of aviation fuel cost in 2017, the company can still ensure the improvement of revenue quality and steady growth under the rapid expansion. Looking forward to 2018, the expansion rate of the company's fleet will slow down. According to the schedule analysis, the total number of weekly planned flights of HNA airlines in the summer and autumn season of 2018 is 13246, an increase of only 3.8% compared with the same period last year, and the growth rate has slowed down significantly. We believe that at a time when first-and second-tier airports are always tense and the revenue quality of third-and fourth-tier cities is difficult to be guaranteed under the pressure of oil prices, it is a rational choice for companies to slow down, cultivate their health and recuperate, and then set sail after a nap.
Investment suggestion
Under the background of the improvement of the supply and demand pattern of the industry and the deregulation of fare control, the expansion speed of the company has slowed down, and the revenue quality of stock routes is also expected to pick up obviously. Based on the assumption that 2018-2019 kilometer income increases 5pts, 5pts, oil distribution center 65 US dollars per barrel, and the exchange rate of US dollar against RMB 6.35, the profit forecast for 2018-2019 is raised by 29.5% and 62.1%, respectively. It is estimated that the company's revenue growth rate from 2018 to 2019 is 16.5% and 20.0%, and its net profit is 3.66 billion and 5.82 billion, respectively, an increase of 10.3% and 58.8% respectively over the same period last year. The EPS is 0.22,0.35 yuan, respectively, and the target price is 3.7 yuan, corresponding to the PE valuation of EPS in 2018-2019.
Risk tips: macroeconomic downturn, higher-than-expected rise in oil prices, sharp fluctuations in exchange rates, security accidents
