2023 results in line with market expectations
Beijing Capital International Airport (BCIA) announced its 2023 results: Revenue rose 104% YoY to Rmb4.56bn, and attributable net loss was Rmb1.70bn (vs. a loss of Rmb3.53bn in 2022). In 2H23, revenue rose 128% YoY to Rmb2.57bn, and attributable net loss totaled Rmb655mn (vs. a loss of Rmb2.12bn in 2H22 and a loss of Rmb1.04bn in 1H23). The firm's results were in line with market expectations.
In 2H23, revenue recovered along with business volume; franchised retail business generated revenue of Rmb310mn. Revenue from the aeronautical business rose 228% YoY and 30% HoH to Rmb1.19bn in 2H23, recovering to 58% of the 2H19 level. BCIA's passenger throughput grew 315% YoY and 29% HoH, recovering to 59% of the 2H19 level.
Passenger volume of domestic and international flights recovered to 66% and 39% of 2H19 levels. Revenue from non-aeronautical businesses rose 81% YoY to Rmb1.39bn in 2H23, recovering to 41% of the 2H19 level. Franchised retail revenue rose 634% YoY and 99% HoH to Rmb310mn, recovering to 17% of the 2H19 level.
Solid cost control in 2H23. In 2H23, operating cost rose 4% YoY, and other operating costs stayed flat YoY excluding the impact of franchise management fees. Staff costs, utilities & power, and operating service fees rose 12%, 4%, and 3% YoY, while depreciation & amortization expenses and aviation safety & security guard costs remained largely stable.
Trends to watch
Recovery of international passenger traffic accelerated in early 2024; per-customer sales at duty-free stores may improve under new contracts. The firm's overall, domestic, and international passenger volume in February 2024 recovered to 68%, 74%, and 50% of the levels in the same period in 2019, up 9ppt, 10ppt, and 4ppt from the recovery level in December 2023.
According to corporate filings, the firm signed new duty-free shopping (DFS) contracts with duty-free merchants in December 2023. Although the guaranteed income and discount levels are lower than those in the previous contracts, we believe the firm's business operations may improve under the new contracts. For example, there may be more boutique stores and the prices of fragrance and cosmetics products may optimize.
Financials and valuation
We lower our 2024 revenue forecasts 5% to Rmb6.54bn, and lower our 2024 net profit forecast to Rmb107mn (previously at Rmb309mn), due to lower assumptions for passenger traffic and growth of several non- aeronautical businesses. We introduce our 2025 earnings forecast of Rmb657mn, as we assume that the firm's passenger volume of domestic and international flights recovers to 74% of the 2019 level, and per- customer sales largely recover to the pre-pandemic level. The stock is trading at 13.9x 2025e P/E. We maintain OUTPERFORM and our target price of HK$2.9 (0.8x 2024e P/B), offering 24% upside.
Risks
Disappointing DFS sales and/or customer traffic recovery; higher-than- expected capex.