China Southern Airlines released its 2023 three-quarter report on October 27, 2023:
In Q3 of 2023, the company achieved net profit of 4.195 billion yuan, a decrease of 10.294 billion yuan from Q3 in 2022, an increase of 75.67% over Q3 in 2019, a net loss of 3.809 billion yuan after deduction of net loss of 3.809 billion yuan, a decrease of 10.380 billion yuan from 2022 Q3, and an increase of 75.77% over 2019 Q3.
In the first three quarters of 2023, the company achieved a cumulative net profit of 1.32 billion yuan, a decrease of 18.907 billion yuan from the first three quarters of 2022, 32.37% of the first three quarters of 2019, net loss of 151 million yuan after deduction of net losses of 151 million yuan, and a loss of 18.171 billion yuan from the first three quarters of 2022.
In Q3 of 2023, driven by the peak summer travel season, the company's production and operation recovered relatively quickly and successfully turned a loss into a profit. The specific performance is as follows:
There was a net increase of 6 aircraft in Q3 in 2023. By the end of September 2023, the company had a fleet size of 903 aircraft, including 886 airliners, a net increase of 6 over mid-2023, and 17 freighter aircraft, the same size as mid-2023.
Domestic supply and demand recovered relatively quickly in Q3 2023. In Q3 of 2023, the company's usable kilometers (ASK) and passenger turnover (RPK) recovered to 97% and 93% of the same period in 2019, respectively. ASK and RPK for domestic routes in China surpassed 2019 and recovered to 118% and 111% respectively in the same period in 2019, international routes ASK and RPK recovered to 53% and 53% respectively in the same period in 2019, and regional routes ASK and RPK respectively recovered to 59% and 63% in the same period in 2019.
The company's average guest occupancy rate is 80%, which is still lower than 3.4 pct in 2019.
In 2023, passenger kilometer revenue rose markedly in Q3, and unit costs remained stable. In terms of ticket prices, it is estimated that the company's revenue for Q3 passenger kilometers in 2023 was 0.57 yuan (estimated passenger transport revenue/RPK), up 4.56% from Q2 in 2023 and 10.48% over the same period in 2019. In terms of costs, the company's supply increased markedly this quarter. It is estimated that the company's operating costs for Q3 in 2023 increased 17% month-on-month, and the unit ASK operating cost was 0.44 yuan, up 2% month-on-month.
In Q3 2023, the company's financial expenses fell 66% month-on-month. The exchange rate of the US dollar against the RMB was relatively stable this quarter. It is estimated that the exchange rate of the US dollar to the RMB fluctuated by -0.64% in Q3 of 2023, which is not expected to have a significant impact on the company's performance. The company's financial expenses for Q3 in 2023 were 1.152 billion yuan, down 66% from Q2 in 2023.
Profit forecast and investment rating: The company's domestic routes always account for a high share, international routes focus on Asia and the Pacific, and the air network structure converges with industry recovery trends. The peak summer travel season is affected by strong market supply and demand and a sharp rise in volume and prices, successfully turning losses into profits. It is expected that the industry will continue to recover in the fourth quarter of 2023 and next year. We lowered the company's profit forecast for 2023 to 1 billion yuan (previous value: 1.8 billion yuan), maintained the profit forecast for 2024-2025 at 61/146 billion respectively, and the corresponding P/E for 2023-2025 was 105.9X/18.1X/7.6X, respectively. The company's performance improved markedly after the summer travel season. We believe that the industry pattern will continue to be optimized in the fourth quarter and next year. The tight balance between supply and demand shows, and ticket prices remain high, and the company will clearly benefit and maintain its “buy” rating.
Risk warning events: macroeconomic downturn risk, risk of rising oil prices, risk of exchange rate fluctuations.