Huaxia Airlines released its 2023 Annual Report and 2024 Quarterly Report on April 23, 2024:
In 2023, the company achieved a net loss of 965 million yuan and a net loss of 963 million yuan from deducted non-mother, a decrease of 1,009 million yuan and 1,023 million yuan, respectively; in the Q4 of 2023, the company achieved a net loss of 268 million yuan to the mother, and realized a net loss of 262 million yuan after deduction.
In Q1 2024, the company achieved operating income of 1,616 billion yuan, up 54.64% from Q1 in 2023 and 24.31% from Q4 in 2023; realized net profit of 0.25 million yuan, and realized net profit of not deducted from mother of 0.15 million yuan.
The company's operations continued to resume in 2023, but due to the expansion of the company's fleet size and rising fuel costs, the company's annual results were still in loss:
The size of the company's fleet continues to grow, and business conditions continue to recover. At the end of 2023, the company's fleet size was 70, a net increase of 5 aircraft compared to 2022, and a net increase of 21 aircraft compared to the end of 2019. The company's ASK and RPK increased by 93.08% and 128.32% respectively from 2022, up 5.32% and -1.59% respectively from 2019; the company's occupancy rate was 75.36%, up 11.63 pcts from 2022, and 5.29 pcts lower than 2019.
The company's passenger kilometer revenue declined year-on-year, and the share of revenue from the individual distribution model increased. In 2023, the company's passenger kilometer revenue was 0.56 yuan, down 13.03% from 2022, but the share of the individual distribution model's revenue in 2023 increased from 73.23% in 2022 to 75.60%.
High oil prices and exchange rate fluctuations affect the company's operating performance. In 2023, the company's unit ASK withholding cost was 0.31 yuan, down 33.66% from 2022. In 2023, oil prices were high and the company's traffic volume increased significantly. The company's fuel cost was 1,888 billion yuan, an increase of 77% over 2022, and the fuel cost per ASK unit was 0.16 yuan, down 8.08% from 2022. Fluctuations in the RMB exchange rate in 2023 caused the company to incur exchange losses of 32.32 million yuan in 2023.
In Q1 2024, as the company's capacity investment grew steadily, travel demand improved year-on-year, the company's passenger occupancy rate continued to rise, and the performance turned a loss into a profit. In the first quarter, the company introduced 2 A320 aircraft, and the fleet size reached 72 aircraft. The company's ASK and RPK increased by 48.59% and 62.03% respectively compared to the same period in 2023. The company's occupancy rate reached 77.04%, up 6.39 pcts from the same period in 2023.
Profit forecast and investment rating: In the short term, we believe that the company's performance will recover as aircraft utilization recovers. In the medium to long term, regional aviation development is supported by policy. As the only large-scale independent regional airline in China, the company has broad scope for future development. We maintained our previous net profit forecast for 2024-2025 at 406/952 million yuan, and added the 2026 net profit forecast of 1,124 million yuan, corresponding P/E of 17.4X/7.4X/6.3X, maintaining the “plus” rating.
Risk warning events: macroeconomic downturn risk, risk of rising oil prices, risk of exchange rate fluctuations.