occurrences

The company released its 2024 semi-annual report. 2024H1 achieved revenue of 79.52 billion yuan, +33.4% year-on-year; realized net profit to mother - 2.78 billion yuan, reversing a year-on-year loss of 0.67 billion yuan. Among them, the second quarter achieved revenue of 39.45 billion yuan, +14.2% year-on-year, and -1.5% month-on-month, and realized net profit of 1.11 billion yuan, an increase of 0.58 billion yuan in year-on-year losses, and 0.57 billion yuan in month-on-month reversal of losses.

Aviation demand recovered at an accelerated pace, and international flights recovered to 80% in 2019. 2024H1 aviation demand recovered significantly year on year, driving the company's revenue growth. The company's ASK, RPK, and passenger volume were +33.4%/+50.0%/+35.0% year over year, respectively. Demand expansion was faster than supply, driving the passenger occupancy rate to increase 8.8 pcts year over year to 79.3%. Among them, international ASK/RPK/passenger volume was +210.4%/+288.6%/+332.9%, respectively, and recovered to 80.9%/78.0%/87.9% in 2019, respectively; the company's rapid restoration of international routes and high passenger demand, but the RPK recovery rate, including distance, was lagging behind, and the recovery rate of the company's remote international routes with core resource barriers was insufficient, weakening profitability.

Volume increases and prices fall, putting pressure on off-season results

Looking at the external environment, aviation fuel prices rose again in the first half of the year, and the RMB exchange rate was under pressure (the company lost 0.36 billion in 24H1 exchange). The overall decline in ticket prices in the industry caused the company to still lose money; off-season ticket price pressure intensified in the second quarter, causing revenue growth to fail to increase profits, and year-on-year losses to expand. 2024H1, the company's revenue per unit was 0.54 yuan, -12.1% year-on-year, +3% over the same period in 2019; operating cost per seat kilometer was 0.45 yuan, -1.9% year-on-year, and +16.7% compared to the same period in 2019.

The company's fleet increased by a net of 10 aircraft during the reporting period, all narrow-body aircraft and regional aircraft. The pace of table expansion is controllable.

Performance recovery is accelerated during the peak season, and the core advantage is expected to strengthen

In July, the company's ASK, RPK, and passenger numbers were +13.2%/+20.4%, respectively, and continued to grow rapidly on the high base of last year's summer travel season. Among them, the number of international visitors has also surpassed the 2019 level (+6.1%). Under the peak season effect, the company is expected to continue the summer travel performance of the previous year and accelerate the recovery of performance. In the context of the Civil Aviation Administration's new round of promoting the construction of international aviation hubs, the resources of core airports are being tightened, the pattern is expected to improve, and the long-term value of the company will be further highlighted.

Investment advice

We expect the company's net profit to be 0.28/6.52/13.44 billion yuan in 2024-2026, respectively, and the year-on-year growth rates will be reversed/2255%/106%, respectively. Given that the company's leading edge is expected to expand, it maintains a “buy” rating.

Risk warning: oil prices have risen, the RMB exchange rate has depreciated, and the recovery of international routes has fallen short of expectations