Description of the event

With 2024Q1, the company achieved operating income of 5.22 billion yuan, a year-on-year increase of 14.2%; realized net profit of 590 million yuan, a year-on-year decrease of 22.6%; and realized net profit without deduction of 530 million yuan, a year-on-year decrease of 19.8%.

Incident comments

Revenue from air speed operations declined, and integrated logistics grew rapidly. 2024Q1, the company's revenue for air express transport/ground integrated services/integrated logistics solutions was 20.0/5.9/2.63 billion yuan, respectively, -17.1%/+6.8%/+63.9% year-on-year. In the first quarter, Pudong's TAC freight rate fell by about 13% year on year. The number of available cargo racks in the company decreased by one compared to the same period last year, and air express revenue declined. However, the company is actively developing major cross-border e-commerce customers, promoting the rapid growth of integrated logistics solutions, and its share continues to rise.

Changxie's high base and fleet declined, and Air Express's gross profit declined. 2024Q1, the gross profit of the company's air express transport/ground integrated services/integrated logistics solutions was RMB 31/23/2.8 billion yuan, respectively, or -57.1%/+37.2%/+2.8% compared with the same period last year. Since the first quarter still implemented the previous year's Changxie price base, the 2022 Changxie price base was high, and the drop in spot freight rates combined with a decrease in the size of freighters led to a decline in the gross profit of Air Express. Excluding the impact of the fleet, the consolidated gross profit of a single aircraft (air cargo+integrated logistics) decreased by only 36.6% year-on-year. In the first quarter, Shanghai's cargo and mail throughput increased 26.6% year on year. Cargo volume increased rapidly, and gross profit from integrated ground services increased dramatically.

Other earnings declined, and sales of freighters contributed to revenue. 2024Q1, the company's expenses increased by 0.7 billion yuan year-on-year during the period, mainly due to an increase in financial expenses. 2024Q1, the company's other revenue fell 110 million yuan year over year to 60 million yuan. In the first quarter, the company completed the sale of two B747 freighters, and asset disposal profit and loss increased by 50 million yuan over the same period last year. In the end, the company's net profit to mother fell by 170 million to 590 million yuan year-on-year.

Cross-border air transport is booming, and profit flexibility for freighters can be expected. Cross-border e-commerce demand will continue to be strong in 2024, the supply of wide-body freighters will grow limited, and the freight center is expected to rise. Considering that the 2024 long-term agreement price increase was better than expected, and the situation in the Middle East may further boost freight rates, freighter profit flexibility can be expected. In addition, the company is steadily advancing the Pudong Airport West Area Cargo Terminal Phase II and the Pudong Airport Smart Cargo Terminal project, and integrated ground services are expected to continue to contribute more. The company's net profit for 2024-2026 is estimated to be 32.4/37.7/4.33 billion yuan, respectively, and the corresponding PE is 9.0/7.7/6.7X, respectively, maintaining the “buy” rating.

Risk warning

1. Risk of policy changes;

2. Low expectations for cross-border e-commerce volume growth;

3. Demand for general air freight falls short of expectations;

4. The number of international flights by foreign airlines has exceeded expectations.