Incident: On the afternoon of March 29, 2024, Shanghai Airport released its 2023 annual report. In 2023, the company achieved revenue of 11.047 billion yuan, +101.6%; net profit to mother was 934 million yuan, loss of 2,995 billion yuan in the same period last year; net profit without return to mother was 829 million yuan, with a loss of 3,076 billion yuan for the same period last year. It is basically in line with the values disclosed in the previous performance report.
Q4 Performance was in line with expectations, and profitability continued to recover. Q4 achieved revenue of 3.126 billion yuan, +131.4% year-on-year; net profit to mother reversed losses of 437 million yuan, increasing quarterly since 2023; net profit after deducting non-return to mother reversed losses to 373 million yuan. Q4 gross margin was 21.4%, recovering to 52.9% in the same period in 2019; net profit margin to mother was 14.0%, recovering to 37.0% in the same period in 2019, +2.1pct. Revenue and profit were basically in line with expectations. Thanks to the continued recovery of domestic and overseas flights and passenger traffic, it was the first time in the year since the pandemic, and profitability continued to recover.
Aerospace/non-aviation revenue recovered to 107%/97% in 2019. The passenger throughput/take-off and landing flights of Pudong Airport and Hongqiao Airport in 2023 was 96.9691 million passengers/707 million flights respectively, of which the Q4 international+ regional routes took off and landing/passenger throughput were 80%/69% of 2019, respectively. By business, aerospace/non-aeronautical business revenue in 2023 was 43.766/6.671 billion yuan, recovering 107%/97% in 2019. The revenue from the tax exemption contract between the company and Nisshang Shanghai in 2023 was 1,788 billion yuan.
International passenger flow will continue to climb, and port tax exemptions have great potential for development. Passenger throughput/take-off and landing flights on the international, Hong Kong, Macao and Taiwan routes of Pudong Airport and Hongqiao Airport in February 2024 was 2.6941 million/17,200 flights respectively, recovering to 87%/92% in 2019. In 2024, with the further increase in international passenger flow and pallet support, there is potential for further growth in port duty-free sales in 2024.
Profit forecast and investment rating: As China's largest port, Shanghai Airport is the core target of the recovery of international aviation. The restoration of international passenger flow will be concentrated in 2024 to drive performance improvements year by year, benefiting from the prosperity of the duty-free industry and the integrated development of the Yangtze River Delta for a long time. Considering that the entry into force of the supplementary agreement to the tax exemption contract affects airport duty-free rents, the 2024/2025 and 2026 profit forecasts for Shanghai Airport were lowered. Net profit returned to mother for 2024-2026 was 25.96/38.02/4.540 billion yuan, respectively (the value before 2024/2025 was 2,985/4.103 billion yuan), corresponding PE was 35/24/20 times, maintaining the “increase” rating.
Risk warning: International travel recovery falls short of expectations, macroeconomic weakening affects residents' spending intentions, risk of competition in import duty-free goods channels, etc.