Make a profit and reverse losses in a single quarter in the peak season, wait for the fleet to further improve its efficiency, and maintain "buy"
The operating income of Huaxia Airlines 9M23 increased by 90.0%, with a net loss of 697 million, which was in line with our previous expectation of 700 million, and 9M22 was a net loss of 1.511 billion. Driven by the peak summer season, 3Q23 further repaired its operation and achieved a turnround in a single quarter, with a net profit of 55 million and a net loss of 558 million for 3Q22. However, taking into account the recent fluctuations in oil sinks, we estimate that the net return profit for 23-25 will be-736pm (previous value-580,000,000 / 693pm). Long-term continue to be optimistic about the core competitiveness of the company's regional line, and will enjoy the growth of the regional market. With reference to comparable companies and their own historical valuations, considering the difference in recovery pace, the company may reverse losses for the whole year for 24 years and continue to grow rapidly, giving a valuation premium to 18x2024's annual PE, with a target price of 8.64 yuan, maintaining "buy".
The peak season operation improved significantly compared with the previous period. 3Q revenue exceeded 19 years during the same period. 5.2%3Q23 's operation further recovered under the impetus of the peak season. ASK/RPK increased by 16.5% and 24.8% respectively compared with the same period in 2019. Compared with the same period in 2019, it was 109% and 106% (2Q23 was 101% and 93%). The occupancy rate of 3Q23 is 80.1%, which is higher than that of 5.3pct, which is lower than that of 3Q19. Revenue levels also improved month-on-month, and we estimated that revenue per kilometer increased by about 18% month-on-month, increasing the company's 3Q23 revenue by 39.8% to 1.636 billion, and 5.2% compared with 3Q19. For 9M22 as a whole, ASK/RPK increased by 74.8%, 98.4%, respectively, to 104%, 98%, 75.7%, and 9.0pct, respectively, which was lower than that of the same period in 1919. Finally, 9M23 operating income increased by 3.852 billion, increased by 90.0%, and returned to 95% of the same period in 1919.
Transport capacity increases diluted unit cost, 3Q turns losses in a single quarter
Although the average ex-factory price of 3Q23 aviation kerosene increased by 7.4% month-on-month, due to the increase in transport capacity, we estimated that the unit ASK cost decreased by 3.7% month-on-month, recorded operating cost of 1.456 billion, increased by 12.2%, less than the revenue growth rate, and gross profit increased by 308 million to 181 million month-on-month. At the same time, because the fluctuation range of 3Q RMB exchange rate is relatively small compared with 2Q, the company's 3Q23 financial expenses are reduced by 244 million to 105 million month-on-month. In the end, the company's 3Q23 reversed its loss to 55 million in a single quarter (2Q23 is-476 million). Looking forward to 4Q, according to the Civil Aviation Administration's "Regional Aviation subsidy Budget" on October 13, the company's 4Q23 will record 145 million of the Civil Aviation Administration's subsidy, a drop of 30 million, and there may still be some pressure on the company's profits in the off-season.
Adjust the target price to 8.64 yuan to maintain the "buy" rating
The company's short-term operations are still recovering, and we expect 23-25 net return to be-7.36 shock 6.18 / 1.166 billion (previous value-5.80). With reference to comparable company 9x2024 PE and considering the difference in recovery pace, the company may reverse losses for 24 years and continue to grow rapidly, and PE valuation may produce a higher premium. At the same time, combined with the company's 19-year PE 18x, it will be given 24-year 18x PE with a target price of 8.64 yuan (previous value of 24 years 19xPE, target price of 10.26 yuan) to maintain "buy".
Risk tips: subsidies are lower than expected, high-speed rail diversion is higher than expected, international oil prices fluctuate, capacity introduction is lower than expected, and the risk of aviation safety accidents.