23H1 The revenue growth rate is lower than the cost growth rate, and the company's performance is under pressure. 23H1 achieved revenue of 1.07 billion yuan/yoy +71.2%, compared with +31.0% over the same period in '19. Net profit to parent was 50 million yuan, the same period last year was -100 million yuan, and the same period in '19 was 280 million yuan. Operating costs yoy +87.4% dragged down profit performance. Among them, depreciation expenses and intangible asset amortization costs/labor costs were +2.4/+160 million yuan year on year, respectively. Overall, it still takes time for the company's production capacity to climb and improve operations.
The aviation business recovered relatively well, while the growth of the non-aviation business was slowing down. Benefiting from the rapid response from China's civil aviation market, the company's aviation business achieved revenue of 490 million yuan/yoy +132.5% in the first half of the year, compared to +33.0% over the same period in '19. Furthermore, the non-aviation business achieved revenue of 570 million yuan/yoy +39.4%, compared to the same period in '19, +29.4%, mainly due to an increase in passenger throughput and an increase in leased area at duty-free pick-up points on the outlying islands. 23H1 duty-free sales/number of duty-free shoppers/number of duty-free goods sold in Hainan Province reached 26.32 billion yuan/3.733 million visits/308.62 million items, respectively, compared to +24.4%/45.4%/1.2%, but there is still a gap from '21 (1.7%/2.4%/16.4%, respectively). Meilan Airport achieved duty-free sales of 1.42 billion yuan/yoy +8.6%, down 35.3% from the same period in '21.
Demand for air passenger transportation during the summer season was released centrally, and the traditional peak season in the second half of the year boosted the company's performance. In July '23, the number of visitors to Hainan reached 6.465,000, +8.0%, compared to the same period in '19, +15.5%; achieved tourism revenue of 14.10 billion yuan/+17.4% over the same period in '19, and +101.2% over the same period in '19. In the same month, the company's aircraft take-off and landing/passenger throughput/cargo and mail throughput were +12.1%/+16.9%-6.6%, respectively, compared with the same period in '19, +5.5%/+5.4%/+3.1%. In the second half of the year, Hainan tourism will enter the traditional peak season, and the company's performance as a major airport in the province is expected to be fully unleashed.
The free trade port hub airport has a stable position and is optimistic about the company's long-term investment value. Currently, the “dual terminal, double runway” model at Meilan Airport is running smoothly. We believe that the bottleneck in production capacity no longer exists, and the additional production capacity needs to be released urgently. As Hainan Island's tax exemption policy continues to advance, Meilan Airport, as a major port of import and export and transportation hub for tourist routes, is expected to further strengthen its passenger flow advantage. According to the “Action Plan to Build a Regional Gateway Hub for Liangyang Airlines at Haikou Meilan International Airport (2023-2025)”, Meilan Airport's passenger throughput/cargo and mail throughput/duty-free sales volume will reach 30 million passengers/206,000 tons/4.5 billion yuan respectively by the end of the year 25. The company's medium- to long-term plans are clear, and will continue to push for ongoing expansion applications and preparations for Phase III expansion projects, further opening up space for future development.
Profit forecasts and investment recommendations. Considering the active promotion of the construction of a free trade port, we adjusted the 23E/24E/25E EPS to -0.22 yuan, 0.51 yuan, and 1.37 yuan/share, respectively, and BPS to 9.10, 9.61 yuan, and 10.98 yuan/share, respectively. The construction of the Hainan Free Trade Port continues to advance. We believe that the airport's traffic advantage has been shown. The company's main business is expected to increase in volume and price, and we are still optimistic about the long-term growth space of the leading free trade port airport. We gave 20X -25X 2024E PE, resulting in a reasonable value range of HK$11.08-13.86. (HKD/RMB exchange rate is 0.9202).
Risk warning: The impact of the epidemic continues, large capital expenses, tax exemption policy changes, and entry into the Shanghai-Hong Kong Stock Connect falls short of expectations.