The demand for civil aviation has restored its natural growth, and with the release of policies to stimulate consumer spending, it is expected that the number of civil aviation passengers will maintain high single-digit growth.
According to Zhito Finance APP, Sinolink has released a research report stating that the supply-demand turning point is approaching, with the fundamentals of transportation looking good, the market improving, favorable policy expectations, and a bullish outlook on domestic demand recovery through options, recommending a focus on the two main lines of aviation and logistics. Fundamentally, the prosperity of the transportation sector is closely related to the macro environment, where import and export prosperity boosts port throughput and cross-border logistics demand, while consumer spending and real estate infrastructure investment support express delivery and ToB logistics demand, and the recovery of travel demand drives the profitability recovery of airlines and high-speed rail.
Sinolink Securities' main points are as follows:
Aviation: It is expected that supply will grow slowly, gradually reaching the supply-demand turning point.
Since 2024, the supply-demand relationship in the industry has continued to improve, with the utilization rate during the peak season surpassing the levels of 2019, and this trend is expected to continue.
(1) On the supply side: Since 2020, airlines have slowed down the introduction of aircraft, and it is expected that by the end of 2024, the cumulative growth compared to 2019 will only be 15%. Currently, the production capacity of Boeing and Airbus is not up to 2018-2019 levels, and the main engine manufacturer GE has seen a year-on-year decline in output, leading to capacity shortages and order backlogs, with the introduction of new aircraft expected to remain at a low single-digit rate.
(2) On the demand side: Passenger traffic has already exceeded that of 2019, with total civil aviation passenger numbers in the industry growing by 11% from January to October compared to 2019, and in October, the number of international passengers on domestic airlines was 97% of that in 2019. Demand has returned to natural growth, and with the release of policies to stimulate consumer spending, civil aviation passenger numbers are expected to maintain high single-digit growth. The future supply-demand turning point is likely to be achieved, with supply expected to grow by 3% year-on-year and demand by 8% in 2025; cumulative supply growth compared to 2019 will be 18%, and cumulative demand growth will be 19%, with capacity utilization expected to exceed 2019 levels. Reviewing history, under optimized supply and demand, airline profits will significantly improve, and coupled with recent improvements in cost-side oil prices, airline profits are expected to be further released.
Logistics: Focus on opportunities in the segmented tracks of the logistics sector.
1) Hazardous chemicals logistics: The warehousing and capacity approval for hazardous chemicals logistics is relatively strict, with leading companies having better qualifications. At the same time, they are increasing their capacity and storage resources through mergers and acquisitions, continuously improving their market share.
Improving domestic demand will enhance the prosperity of corresponding chemicals, and the profitability of distribution business primarily relies on the rise in chemicals prices, while the profitability of transportation business mainly depends on the demand for chemicals. If fiscal stimulus improves domestic demand, under favorable operating rates and inventory conditions, the demand for hazardous chemicals logistics-related businesses such as transportation, warehousing, and distribution is expected to increase.
2) Domestic trade collective transportation: Protected by policies, domestic trade collective transportation has relatively high entry barriers, with a favorable industry competition structure. The top three shipping companies account for about 80% of the capacity.
The products transported in the domestic trade collective transportation industry include consumer goods, industrial products, and resources, which are related to the overall macro economy. Improving domestic demand will drive the increase in physical workload, leading to better transportation demand, with significant upward elasticity in freight rates, and a broad space for transforming bulk transport to collective transport.
3) Direct express delivery: The direct express delivery sector has a favorable structure, with s.f. holding holding a 64% market share in the time-sensitive parcel market. In the high-end direct express delivery market, a duopoly structure has emerged between s.f. holding and jd.com.
Compared to traditional e-commerce express delivery companies, direct express delivery companies have a more diversified demand structure. In addition to time-sensitive parcels, s.f. holding also includes fast delivery, cold chain, intra-city, supply chain, and international business. There is optimism about the acceleration of growth in business parcels and mid-to-high-end consumer express parcels in a pro-cyclical context, and expectations for an increase in logistics volumes in fast delivery and cold chain businesses. jd.com logistics focuses on integrated supply chain logistics services, continuously optimizing logistics networks over the years, with the overall volume from third-party businesses expected to grow by fully accessing the Taobao and Tmall platforms, achieving rapid profit growth through economies of scale and lean cost control.
Industry strategy: Optimistic policy expectations, focusing on two main lines in aviation and logistics.
Currently, the fundamentals of transportation are positive. With policies boosting confidence in domestic demand, two investment themes are recommended for the transportation sector:
1. The supply and demand turning point is approaching, suggesting attention to the aviation sector focused on discretionary consumer spending.
2. The outlook is positive, with a bullish view on domestic demand recovery options; attention is suggested for hazardous chemical logistics, domestic shipping, and direct express sectors.
Recommended portfolio: air china limited (601111.SH,00753), china southern airlines (600029.SH,01055), spring airlines (601021.SH), juneyao airlines (603885.SH), milkyway chemical supply chain service (603713.SH), guangdong great river smarter logistics (002930.SZ), xingtong shares (603209.SH), shenghang shares (001205.SZ), shanghai zhonggu logistics (603565.SH), s.f. holding (002352.SZ), jd.com logistics (02618).
Risk warning: risks of macroeconomic performance falling short of expectations, risks of significant oil price increases, and risks of depreciation of the renminbi exchange rates.
