Key points of investment
The company announced 24Q1 results: revenue of 40.066 billion yuan, an increase of 59.83% year on year, net profit attributable to mother - 1,674 billion yuan (23Q1 was -2,926 billion yuan), net profit not attributable to mother - 1,713 billion yuan (-3,018 billion yuan in 23Q1).
Operating data
(1) As of the end of 24Q1, the company had a fleet of 911 aircraft, including 398 own aircraft, 217 leased, and 296 leased. A net total of 6 aircraft were introduced during the reporting period.
The company announced on April 26 that it will purchase 100 C919s (extended-range) from COMAC and plan to deliver them in batches from 2024 to 2031, with a contract price of approximately US$10.8 billion.
(2) 24Q1: ASK, RPK, and occupancy rates were +45%, +63%, and +8.5pct year-on-year; compared with 19Q1, +6%, +3%, and -2.3 pct, respectively.
Among them, 24Q1 domestic flights: ASK, RPK, passenger occupancy rates were +15%, +29%, and +8.7pct, respectively.
International flights: ASK, RPK, passenger occupancy rates were +518%, +682%, and +16.3pct year-on-year respectively.
Regional lines: ASK, RPK, and occupancy rates were +98%, +123%, and +8.2pct, respectively, year-on-year.
Revenue side:
The 24Q1 unit RPK revenue was 0.58 yuan, down 16.5% year-on-year and 2.7% higher than 19Q1.
Cost cost side:
The operating cost per ASK unit in 24Q1 was 0.45 yuan, a year-on-year decrease of 13.6% and an increase of 16.7% over 19Q1.
Among them, aviation fuel costs, the average DUTY price of aviation kerosene imported in 24Q1 was 6,664 yuan/ton, down 4.1% year on year and 40.1% higher than 19Q1. Furthermore, the cost of non-fuel per unit ASK is expected to drop sharply as utilization recovers.
In terms of financial expenses, assuming that the US dollar debt exposure remains unchanged from 2023, according to the company's 23 annual report, a 1% depreciation of the RMB exchange rate against the US dollar will lead to a decrease of 229 million yuan in net profit. At the end of 24Q1, the exchange rate of RMB against the US dollar depreciated by 0.2% compared to the end of 2023, which is expected to cause exchange losses of 40 million yuan.
Profit forecasting and valuation
The growth rate of the industry's capacity supply decidedly slowed during the 14th Five-Year Plan period, and it is expected that there will be a clear mismatch between supply and demand during future demand recovery. As the only airline carrying the flag, the company has high quality routes and commercial passenger groups, and has strong ability to raise prices, and performance flexibility is expected to be unleashed. Based on current demand and performance recovery, we lowered our profit forecast. The company is expected to achieve net profit to mother of 15 billion yuan, 4.9 billion yuan and 6.1 billion yuan in 2024-2026, respectively, and downgraded to the “increase in holdings” rating.
Risk warning
Demand recovery fell short of expectations, oil and foreign exchange fluctuated sharply, etc.