Description of the event

2024H1, the company's revenue was 11.29 billion yuan, up 20.4% year on year; net profit to mother was 1.28 billion yuan, up 0.5% year on year. 2024Q2, the company's revenue was 6.06 billion yuan, up 26.3% year on year; net profit to mother was 0.69 billion yuan, up 35.0% year on year. 2024H1, the company plans to distribute a cash dividend of 3.89 yuan (tax included) for every 10 shares to all shareholders.

Incident comments

Airspeed operating revenue grew steadily, and integrated logistics revenue increased rapidly. 2024Q2, the company's revenue for air express transport/ground integrated services/integrated logistics solutions was 2.33/0.63/3.1 billion yuan, respectively, +10.3%/+2.8%/+49.4% compared with the same period last year. The average price of 2024Q2 and Pudong TAC increased 21.0% year on year, but the number of freighters available by the company fell 7.1% year on year in the first half of the year. By optimizing the route network, encrypting the number of international long-haul flights, and improving the utilization rate of crew resources, the company achieved a slight increase in the daily utilization rate and carrying rate of all freighters, and achieved steady growth in aviation speed operating revenue. In the first half of the year, the cargo and mail handling volume of the company's cargo terminals was +1.3% year-on-year, and the revenue performance of integrated ground services was stable. The company strengthens cooperation with major cross-border e-commerce customers to promote the rapid growth of integrated logistics solutions.

The profit of air express transportation is under pressure, and the gross profit of integrated logistics has increased dramatically. 2024Q2, the gross profit of the company's air express transport/ground integrated service/integrated logistics solutions was 0.52/0.26/0.51 billion yuan, respectively, -8.4%/+0.4%/+66.6% compared with the same period last year. Despite a year-on-year increase in freight rates in the second quarter, Air Express's gross profit declined due to a decrease in the number of available freighters and a reduction in passenger aircraft abdominal cabin business rates. The company deepens direct customer development and vigorously develops the cold chain fresh food business. The rapid growth in cross-border e-commerce volume and fresh food volume has driven a significant increase in the gross profit of integrated logistics solutions.

Financial expenses were well controlled, and Q2 results increased significantly. During 2024Q2, the company's expenses fell 0.19 billion year on year, and financial expenses were significantly optimized, mainly due to the narrowing of the fluctuation of the US dollar and the reduction in the size of interest-bearing debt. The company's other earnings fell 0.02 billion yuan year on year in the second quarter. In the end, the company's net profit without return to mother increased 39.7% year over year to 0.67 billion yuan.

The amount of employees' shareholding was adjusted to improve the quality and efficiency of mid-term dividends. China Eastern Airlines Logistics transferred part of the partnership shares held by China Eastern Airlines Group to some employees under the shareholding plan of China Eastern Airlines Group's wholly-owned subsidiary of China Eastern Airlines Group. The targets of the proposed adjustment are 59.6% partnership share of Tianjin Chiyuan, 35.1% partnership share of Tianjin Jiayuan, and 14.1% partnership share of Tianjin Zeyuan, which together correspond to 3.50% of China Eastern Airlines Logistics's shares held by 33 people. At the same time, the company issued an interim dividend announcement and plans to distribute a cash dividend of 3.89 yuan (tax included) for every 10 shares, with a corresponding dividend ratio of 48.4%.

Mid-term dividends increase returns, and the boom can be expected to continue during the peak season. For 2024H1, the company plans to pay a cash dividend of 3.89 yuan (tax included) for every 10 shares, with a corresponding dividend ratio of 48.4%. If the 24-year dividend ratio maintains this ratio, the corresponding 24-year dividend rate is 6.4%, and the dividend rate has a safety cushion. Looking ahead to the second half of the year, demand for cross-border e-commerce will remain high. The supply side is limited by the slowing expansion of Boeing deliveries. As September enters the peak season for cross-border e-commerce, it is worth looking forward to the flexibility of air freight prices during the peak season. The company's net profit for 2024-2026 is estimated to be 3.22/3.66/4.23 billion yuan, respectively, and the corresponding PE is 7.9/6.9/6.0X, respectively, maintaining a “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.