China Eastern Airlines released its quarterly report on April 29, 2024:

In Q1 2024, the company achieved operating income of 33.189 billion yuan, up 49% from Q1 in 2023, achieved net profit of 803 million yuan, and realized net profit deducted from non-mother of 971 million yuan, a sharp reduction in losses compared to Q1 2023.

In terms of operation, the 2024 Q1 fleet was 786 aircraft, and supply and demand continued to recover. As of March 2024, the company's fleet size was 786 (excluding business jets), a net increase of 4 aircraft compared to the end of 2023. In Q1 2024, the company's ASK and RPK increased by 52% and 74%, respectively, and recovered to 111% and 109% in the same period in 2019. The company's occupancy rate was 80.67%, up 10.05 pcts from Q1 in 2023, and down 1.91 pcts from the same period in 2019.

In terms of revenue, there was a significant year-on-year increase in Q1 2024. In Q1 2024, the company achieved revenue of 33.189 billion yuan, up 49% from Q1 2023 and 18% from Q4 2023.

In terms of costs, the operating cost per ASK decreased year-on-year due to the recovery of the company's capacity. In Q1 2024, the company's operating costs were 31,682 billion yuan, up 31% from Q1 2023 and 1% from Q4 2023. The estimated operating cost of the company's unit ASK was 0.4,329 yuan, down 14% from Q1 2023, and up 10% from Q1 2019.

In terms of expenses, the company's total expenses increased year over year. In Q1 2024, the company's sales, management, R&D, and financial expenses totaled 3,712 billion yuan, up 25% from Q1 2023 and 15% from Q4 2023.

Profit forecast and investment rating: Considering that the company still did not turn a loss into a profit in the first quarter, we lowered the company's net profit forecast for 2024-2026 to 41/87/9.7 billion yuan (previous value was 67/127/13.6 billion yuan), and the corresponding PE/ is 20.9X/9.9X/8.8X, respectively. However, as international routes continue to recover throughout the industry and the domestic supply and demand pattern continues to improve, we expect that the company's aircraft utilization rate will continue to increase and fixed costs will continue to be diluted, thus driving the company's performance growth and maintaining the “buy” rating.

Risk warning events: macroeconomic downturn risk, risk of rising oil prices, risk of exchange rate fluctuations.