Introduction to this report:
Earnings are initially showing elasticity, and the rise and continuation of the profit center in the future is expected to exceed market expectations. The construction of the Beijing Daxing hub will gradually optimize the air network structure and expand the space for long-term development. Maintain an increase in holdings rating.
Key points of investment:
Maintain an increase in holdings. 2 023Q3 initially showed profit elasticity. Considering that the increase in oil prices exceeded previous assumptions, the net profit forecast for 2023 was lowered to 2 (26) billion yuan (originally 2.6) billion yuan. The 2024 forecast was maintained at 9.8 billion yuan, and the 2025 forecast was increased by 10.7 billion yuan. The profit center can be expected to rise in the future. The construction of the Beijing Daxing hub will gradually optimize the air network structure and expand long-term development space. Maintain the target price of 7.85 yuan.
Performance increased significantly compared to before the pandemic, showing initial profit elasticity. The company returned 4.2 billion yuan in net profit in a single quarter in 23Q3. Since reversal of losses in a single quarter for the first time in 2021, the company's net profit was up 76% from 19Q3, and net interest rate increased by 3 percentage points. 1) Revenue: Compared with 19Q3, RPK recovered 93%, passenger occupancy rate was 3% lower, estimated double-digit customer revenue growth, and revenue increased 9%; 2) Costs: Compared with 19Q3, ASK recovered 97%, the average price of aviation fuel increased by more than 30%, and operating costs increased 12%. 3) Exchange: RMB depreciated nearly 3% against the US dollar in 19Q3, while the 23Q3 exchange rate was stable, reducing exchange losses by more than 1.6 billion yuan after tax.
Freight has smoothly returned to the new normal, and the profit center of passenger transport can be expected to rise. 1) Passenger transportation: Company fares rise with the industry. The market believes that short-term factors such as active profit management are dominated by short-term factors such as active profit management. We believe that the long-term effects of ticket price marketization are underestimated. As supply and demand recover, the central rise in ticket prices and passenger transport profits will continue to exceed expectations. 2) Freight: As the only major cargo carrier that has not been divested, the annual net profit of logistics companies has exceeded 4 billion yuan in the past three years. International air freight prices declined in 2022. Cargo revenue in the first half of 2023 was still 63% higher than before the epidemic, and logistics companies made a profit of nearly 1.3 billion yuan. With the resumption of additional international classes in the future, the company is expected to smoothly return to the new normal by strengthening operations and building a freight hub in Daxing, Beijing.
The construction of the Beijing Daxing hub will gradually optimize the air network structure and expand the space for long-term development. The company relocated to Beijing Daxing Airport as the largest base airline and is actively building a Guangzhou-Beijing dual hub network. Revenue from Beijing's stock of flights has declined, and the incremental benefits of optimizing third- and fourth-tier flights to Daxing are impressive.
At the same time, Beijing has an excellent location, and international hub construction is expected to enhance the long-term profitability of international business.
Risk warning. Economic fluctuations, oil price exchange risk, increased dilution, safety incidents, etc.