Production and operation improved, and domestic data performance surpassed 19 in the same period. The number of aircraft taking off and landing at Pudong Airport in 24Q1 was 129,000, up 1.73% from the same period in '19; it increased 19.9% from the same period in China; international and regional passenger throughput recovered to 81.9% in the same period in '19; completed passenger throughput of 18.28 million passengers recovered to 97.08% in the same period of '19, with a domestic increase of 21.7% over the same period in '19, and international and regional flights to 73.5%; the cargo and mail throughput was 88 tons, surpassing 8.8% in the same period in '19. The number of aircraft taking off and landing at Hongqiao Airport was 69,300, up 12.64% year on year. The number of flights taking off and landing in China increased 6.12% year on year, completing passenger throughput of 11.833 million, up 29.95% year on year. Its passenger throughput within China increased 22.03% year on year, and cargo and mail throughput was 99,000 tons, up 51.15% year on year.

Q1 Revenue improved. 2024Q1's revenue was 3,029 billion yuan, up 40.61% year on year. Net profit attributable to mother was 386 million yuan, reversing loss of 488.30% year on year, and net profit of 382 million yuan after deducting non-return net profit of 382 million yuan. Due to the relatively rigid cost of the airport and proper cost management, with the recovery in throughput, operating income improved significantly. The company's gross margin rebounded 2.0 month-on-month, and the net margin fell 1.3 percentage points month-on-month to 23.5%/12.7%.

2024Q1's non-aviation revenue was further improved along with the restoration of international passenger flow. Among them, tax-free related business revenue reached 347 million yuan and advertising-related business revenue of 162 million yuan.

The equity incentive plan improves the company's incentive and restraint mechanism and is conducive to the long-term development of the company. Shanghai Airport announced an A-share restricted stock incentive plan: it is intended to grant no more than 10.5085 million A-share restricted shares to incentive recipients (including directors, senior managers, and other core personnel working in the company and Shanghai Airport branches and holding subsidiaries at the time of the announcement of this plan), accounting for approximately 0.42% of the company's total share capital (2488481,340 shares) at the time of the announcement of this plan. Of these, 8.4068 million shares were granted for the first time, accounting for 0.34% of the company's total share capital at the time the plan was announced; 2.1017 million shares were reserved, accounting for about 0.08% of the company's total share capital when the plan was announced. This equity incentive plan helps to further improve the corporate governance structure of the company, achieve medium- to long-term incentives and restrictions on the company's directors, senior management and other core key personnel, fully mobilize their enthusiasm and creativity, integrate their interests more closely with the company's long-term development, prevent brain loss, and achieve sustainable enterprise development.

Profit forecasting and investment advice. We anticipate a further recovery in related business revenue as international passenger flow resumes. The two major airports in Shanghai remain unchanged, and aviation revenue is expected to grow steadily.

Based on the latest developments in international flight restoration and duty-free business, we adjusted the company's net profit forecast for 24-25 to be 2,882 million/4,071 billion, respectively, and introduced net profit of 4.367 billion yuan for the first time in '26. We applied 2-2.5x2024bps with reference to historical valuations (10-year Forward 365 days average PB is about 3.2x) and comparable company valuations to arrive at a reasonable value range of 34.89-43.64 yuan, giving a “superior to the market” rating.

Risk warning. The economic downturn, the outbreak of the epidemic, international tension, etc.