Introduction to this report:
The company hit a record profit in a single quarter due to high oil prices in 2023Q3. In the future, the company's fleet is expected to be well matched, and profitability will continue to lead the industry. The centralized release of outbound travel in 2024 and a significant increase in performance exceeding expectations are expected to catalyze valuation recovery.
Key points of investment:
Maintain an increase in holdings rating. The performance of 2023Q3 reached a record high. The net profit forecast for 2023-24 was raised to 27.38 billion yuan (originally 15/28), and the 2025 forecast was increased by 4.1 billion yuan. The future fleet is expected to be well-matched, and profitability will continue to lead the industry. The centralized release of outbound travel in 2024 and a sharp increase in performance exceeding expectations are expected to catalyze valuation recovery. Maintain the target price of 68.7 yuan.
2023Q3 recorded a record high in single-quarter earnings. The company's net profit for the 2023Q3 single quarter reached 1.84 billion yuan, and the decline in high oil prices reached a record high in a single quarter. Excluding the impact of income tax, 2023Q3 profit before tax increased by 74% compared to 2019Q3, and profit margin before tax increased by 7 percentage points. 1) Revenue: Compared with 19Q3, RPK increased 19%, passenger occupancy rate recovered, estimated passenger revenue increased by 16%, driving revenue by 38%; 2) Costs: Compared with 19Q3, the average price of aviation fuel increased by more than 30%, ASK increased by 19%, and digital and refined management continued to help optimize and reduce costs. It is estimated that fleet turnover has not fully recovered, so unit fuel costs are lower than before the epidemic, and operating costs have only increased 26%.
The increase in ticket prices led the industry, and 2024 can be expected to be a profitable year. 1) Domestic: The company led the industry in terms of customer revenue growth. In addition to strong demand and a low base, it benefited from active revenue management in low-tier industries and optimization of company customer sources. 2) International: As travelers develop their outbound travel mentality, the company benefits from overseas security advantages and grasps the high price stage of international flights to increase the number of classes rapidly. The expansion of international classes in the industry in 2024 will drive the recovery of supply and demand. Combined with the centralized release of outbound exports, it is expected to be a profitable year.
The future fleet is expected to be well-matched, and profitability will continue to lead the industry. The company's profit in 2023 exceeded expectations and the valuation fell, or it may stem from market concerns and uncertainty about future aviation network expansion.
We believe that the company's fleet planning is reasonable. Over the past few years, it has cultivated third-tier bases, and has actively explored main line markets such as Daxing/Tianfu/Xi'an. It is still hoped that the future fleet will match well.
Risk warning. Economic fluctuation risk, subsidy risk, oil price risk, safety incidents, etc.