China Eastern Airlines released its 2023 three-quarter report on October 27, 2023:
In Q3 of 2023, the company achieved net profit of 3.642 billion yuan, a reduction of 13.022 billion yuan from 2022 Q3, an increase of 50.25% over the same period in 2019, a net profit deduction of 3.481 billion yuan, a decrease of 12.984 billion yuan from 2022 Q3, and an increase of 49.34% over the same period in 2019.
In the first three quarters of 2023, the company achieved net loss of 2,607 billion yuan, a reduction of 25.509 billion yuan from Q3 in 2022, net loss of 3.201 billion yuan after deducting non-return to mother, and a loss of 25.152 billion yuan compared to Q3 2022.
In the third quarter of 2023, affected by the peak summer travel season, the company's production and operation resumed rapidly. The profit level in a single quarter was high, and losses were significantly reduced throughout the year. The specific performance is as follows:
In 2023 Q3, there was a net reduction of 1 aircraft. As of September 30, 2023, the company operated 781 airliners (excluding business jets), a net decrease of 1 compared to mid-2023.
Supply and demand recovered rapidly in Q3 of 2023. In Q3 2023, the number of kilometers available to the company (ASK) and passenger turnover (RPK) recovered to 99% and 92% of the same period in 2019, respectively. ASK and RPK for domestic routes recovered relatively quickly, to 123% and 113% in the same period in 2019, respectively. In Q3 2023, ASK and RPK for international routes will return to 56% and 53% of the same period in 2019, and regional routes will return to 81% and 85% respectively in the same period in 2019. The average customer occupancy rate of Q3 companies was 77%, which is still lower than 6pct in the same period in 2019.
The ticket price for Q3 in 2023 increased significantly, and the cost per unit ASK remained stable. In terms of ticket prices, the company estimates that the company's revenue for Q3 passenger kilometers in 2023 was 0.62 yuan (estimated passenger transport revenue/RPK), up 9.25% from Q2 in 2023 and 13.51% 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 13.80% month-on-month, and the unit ASK operating cost was 0.43 yuan, a decrease of 1% over the previous month.
In Q3 2023, the company's financial expenses fell 61% 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 1,223 billion yuan, down 61% from Q2 in 2023.
Profit forecast and investment rating: The company is the two largest carriers in Shanghai, and the advantages of mutual flight routes between first-tier cities are obvious. Under the situation of strong supply and demand in Q3, the company's performance in a single quarter improved dramatically. Considering that international routes have not fully resumed, that the fourth quarter is the traditional low season for the industry, and that oil prices have been high recently, we have lowered our previous performance forecast for 2023-2025. It is estimated that the company's net profit forecast for 2023-2025 is -39/68/12.7 billion yuan (previous value: 15/75/14.8 billion yuan), and the corresponding P/E is -24.1X/14.1X/7.5X respectively. We expect the industry pattern to continue to improve in the years to come. Under the industry pattern where ticket prices are relatively high and supply is limited, 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.