Key investment points

Q3 made a profit of 4.1 billion yuan, and the performance slightly exceeded expectations

In the first three quarters of 2024, the company achieved revenue of 128.1 billion yuan, +21.5% year-on-year, and net profit to mother of 1.36 billion yuan, or +72.1% year-on-year. Among them, in 24Q3, revenue was about 48.6 billion yuan, +6.0% year on year, and net profit to mother was 4.14 billion yuan, or -2% year over year. The performance slightly exceeded expectations. It is expected that there will be a significant contribution to exchange earnings and Cathay Pacific's investment income.

Operating data: Q3 occupancy rate increased 5.5 pct year over year to 81%

Operating data: 24Q3, ASK and RPK +12.5% and +28.8% year on year 23 respectively, occupancy rate 81.0%, +5.5 pct year on year 23, and -1.2 pct year on year 19. 1) Domestic routes: ASK -0.2% YoY, passenger occupancy rate 82.4%, YoY +6.4pct; 2) International and regional routes: ASK +61% YoY, returning to 91% in '19, passenger occupancy rate 77.6%, +4.4pct YoY.

Fleet size: As of the end of 24Q3, the company's fleet size was 924, with a net increase of 19 aircraft in the first three quarters.

Earnings analysis: Volume increases and decreases during the peak summer season in Q3, and RMB appreciation contributed to exchange earnings

Revenue side: 24Q3, the company's revenue was about 48.6 billion yuan, +6.0% year-on-year. The unit RPK revenue was 0.623 yuan, -12% year on year 23 and -0.03% year on year 19, mainly because ticket prices fell from a high base.

Cost side: 24Q3, the company's operating costs were about 42.3 billion yuan, +11% compared with the same period last year. The operating cost per ASK unit is about 0.439 yuan, -1.5% year on year 23, and +13.6% year on year 19. The estimated Q3 unit aviation fuel cost is about 0.154 yuan, +1.0% year on year 23, and +30.4% year on year 19, mainly because the price of aviation fuel is high; the unit non-fuel cost is 0.285 yuan, -2.8% year on year 23, and +6.2% year on year 19, mainly because the utilization rate is still recovering.

Expense side: 24Q3 financial expenses were 1.01 billion yuan, a year-on-year decrease of 0.51 billion yuan, mainly due to the 1.7% appreciation of RMB at the end of Q2 to record exchange earnings at the end of 24Q3, and the expected increase in profit was about 0.38 billion yuan.

Investment income: Q3 achieved net investment income of 0.91 billion yuan, +7% year-on-year, mainly from Cathay Pacific contributions.

Profit side: Q3 net profit of 4.14 billion yuan to mother, -2% year-on-year. Expected to contribute significantly to exchange earnings and investment income.

Profit forecasting and investment advice

The company's net profit for 2024-2026 is expected to be -0.5, 5.1, and 9.6 billion yuan respectively, maintaining an “increase in holdings” rating.

Risk warning

Demand fell short of expectations, oil prices rose sharply, RMB depreciated sharply against the US dollar, etc.