Core views:
Incident: Shanghai Airport releases its 2023 annual report. Annual operating income was 11.047 billion yuan/yoy +101.57%; net profit to mother was 934 million yuan, reversing year-on-year losses, and loss of 2,995 billion yuan in '22. Net profit after deducting non-return to mother was 829 million yuan, reversing the year-on-year loss, and lost 3,076 billion yuan in '22.
Passenger flow grew steadily, and business gradually resumed: Shanghai's two passenger throughput in '23 was 96.991 million passengers, recovering to 80% in '19, of which Pudong and Hongqiao were 72% and 93% in '19. Along with the recovery in passenger flow, the company's annual aviation and non-aviation business revenue increased by 2,554 billion yuan and 3,012 billion yuan, respectively, of which duty-free rents were 1,788 billion yuan, an increase of 1,425 billion yuan over the same period last year.
Costs remained basically stable, and profits gradually increased in a single quarter: along with the continued recovery in business volume, the company's costs increased slightly by 3.62% year-on-year for the full year of '23. At the same time, revenue from the airport advertising and aviation fuel businesses in which the company is a shareholder has also improved. With the help of daily assets acquired, the company's investment income increased by 484 million yuan over the same period last year. The company's profit level gradually increased in a single quarter, with Q4 net profit attributable to mother of 437 million yuan, an increase of 73 million yuan over the previous quarter.
Break out of the trough and focus on the recovery trend of international flights: the essence of Shanghai Airport as a high-end traffic platform has not changed, and the airport's natural monopoly position and long-term passenger flow growth space have not changed. In the current airport model, tax exemption is still the most flexible business and is highly dependent on the recovery of international passenger flow. The continued release of visa-free benefits is expected to drive the company's international passenger flow back to a marginal acceleration, thereby injecting additional impetus into the recovery of the duty-free business. Pay close attention to the recovery trend of international flights and look forward to the return of the value of the company's duty-free business.
Profit forecasting and investment advice. The company's net profit for 24-26 is estimated to be 26.10, 37.00, and 5.671 billion yuan. Based on the DCF model, the company's reasonable value is 50.75 yuan/share, corresponding to PE in 24 and 25, respectively. It is optimistic about Shanghai Airport's status as an international passenger transport hub and traffic monetization potential, and for the first time, it has been covered with a “gain” rating.
Risk warning: economic fluctuations; public health emergencies; policy changes; infrastructure progress falling short of expectations; aviation safety incidents.