Key investment points

Q3 made a profit of 3.2 billion yuan, and the performance slightly exceeded expectations

In the first three quarters of 2024, the company achieved operating income of 134.7 billion yuan, +12.7% year-on-year, and net profit to mother of 1.96 billion yuan, or +49% year-on-year. Among them, in 24Q3, revenue was about 49.9 billion yuan, +4.6% year on year, and net profit to mother was 3.19 billion yuan, or -24% year over year. The performance slightly exceeded expectations. It is expected that the freight business profit+exchange revenue will contribute significantly.

Operating data: Q3 passenger occupancy rate recovered to 85.5%, up 1.8 pct from 19Q3. Operating data: 24Q3, ASK and RPK were +11% and +19% year on year, respectively, occupancy rate 85.5%, +5.3 pct year on year 23, and +1.8 pct year on year 19. 1) Domestic routes: ASK +1% YoY, passenger occupancy rate 85.7%, YoY +6.2pct; 2) International and regional routes: ASK +58% YoY, returning to 85% in '19, passenger occupancy rate 84.8%, +1.4pct YoY.

Fleet size: As of the end of 24Q3, the company's fleet size was 913, a net increase of 5 aircraft in the first three quarters.

Earnings analysis: Price increases and decreases during the peak summer season in Q3. RMB appreciation contributed to exchange earnings. Revenue side: 24Q3. The company's revenue was about 49.9 billion yuan, +4.6% over the same period last year. The unit RPK revenue was 0.587 yuan, -12% year on year, mainly due to ticket prices falling from a high base in the previous year; +3% year on year 19, which is expected to contribute significantly to the freight business.

Cost side: 24Q3, the company's operating costs were about 42.2 billion yuan, +7% compared to the same period last year. The operating cost per ASK unit is about 0.43 yuan, -4% year on year 23, and +11% year on year 19. The estimated Q3 unit aviation fuel cost is about 0.153 yuan, -4% year on year 23, and +24% year on year 19, mainly because the price of aviation fuel is higher than the same period in '19; the unit cost of non-fuel is 0.272 yuan, -4% year on year 23, +5% year on year 19, mainly because the utilization rate is still recovering.

Expense side: 24Q3 financial expenses were 0.94 billion yuan, a year-on-year decrease of 0.21 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 0.54 billion yuan.

Profit side: Q3 net profit of 3.19 billion yuan, -24% year over year. Performance slightly exceeded expectations. Freight business profit+exchange earnings are expected to contribute significantly.

Profit forecasting and investment advice

The company's net profit for 2024-2026 is estimated to be 0.1, 3.4, and 6 billion yuan, respectively, maintaining a “buy” rating.

Risk warning

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