Waiting for the company's additional issuance to land, it may be expected to benefit from increased liquidity in the short and medium term, and it is still optimistic about the growth space of the free trade port portal hub in the long run. In the short term, the company still has additional issues to be launched, and it is estimated that about 30% of the EPS will be diluted if the IPO is completed. However, in the medium term, as the debt and other risk problems brought about by the restructuring of HNA Group are gradually lifted, according to the basic requirements of the Shanghai-Hong Kong Stock Connect, we analyze the company may be included in the Shanghai-Hong Kong Stock Connect, and believe that it will benefit from the upward movement of the valuation center brought about by the increase in liquidity.
In the long run, we are still optimistic about the status of airports in the provincial capital of Hainan Island, and we expect that the production capacity of the second phase of the project will be doubled, and the construction of "tax exemption on outlying islands" and "free trade port" will further contribute to its rapid and steady growth.
In 2020, the company's tax exemption and other non-aviation performance is outstanding, although an one-time confirmation of HNA airport investment losses caused by huge performance losses, but HNA Group restructuring related debt risk problems gradually resolved. Hit by the epidemic in 2020, the decline in production led to a 35% drop in aviation revenue compared with the same period last year; however, the liberalization of the tax exemption policy on outlying islands led to a substantial increase in franchise income related to airport tax exemption, driving a 4.6% year-on-year increase in non-aviation income, while total revenue fell only 13% year-on-year to 1.37 billion. In addition, the company recognized an one-time impairment loss of 502 million of related assets and a loss of 1.37 billion of HNA Airport Holdings' long-term equity investment, resulting in a loss of 1.34 billion for the whole year. Although there are still 3.24 billion loans from the parent company of the syndicate and 1.94 billion of its own loans, considering that Meilan Airport is the airport of the capital of Hainan Province and the port status is special, we analyze that to a certain extent, we may have the financial support of the syndicate. in the short term, there is little liquidity risk caused by the joint loan of the parent company.
We believe that the impact of the duty-free "mail delivery" policy on companies is limited, and the long-term corporate duty-free market share may decline as competition intensifies, but we expect duty-free sales to maintain considerable growth. Although the Ministry of Finance and other three ministries and commissions have previously issued a notice on increasing duty-free shopping and pick-up methods for passengers from outlying islands in Hainan, adding delivery by mail and picking up goods back to the island, we believe that the mail-to-home service has little impact on the actual sales diversion of the airport offline stores, and the airport duty-free shops rely on free diversion, and the richness of their sales categories, prices and shopping guide services are the key. Despite the increase in the number of competitors on the island, we expect that the company's tax-free sales market share may decline, but thanks to the rapid growth of the island's tax-free market, the steady growth in passenger volume, and the implementation of the preferential policy for tax-free shopping from July 1, 2020, we expect the company's tax-free sales to maintain a considerable growth rate, with year-on-year growth of 93% and 28% to 54 and 7 billion yuan respectively in 2021 and 2022.
Profit forecast and investment advice. Considering the production time and output changes of the second phase of the project, we update the net profit of 21e and 22e to 710 million / 733 million respectively, and introduce 1.09 billion of the net profit of 2023 for the first time. Based on the comprehensive valuation of the comparable company, we give 20X-25X 2021E PE and get a reasonable value range of HK $36.00-HK $45.00. We use DCF to calculate the reasonable market capitalization of Meilan Airport is 30.29 billion RMB, corresponding to HK $76.79 per share (the exchange rate of Hong Kong dollar to RMB is 0.8334). The company has previously announced that it will issue additional shares in 2021, and we expect to dilute EPS by about 30% after the additional offering. After considering the dilution of additional shares, the corresponding value per share is 27.69-34.62 Hong Kong dollars, which is maintained to be "better than the market".
Rating.
Risk tips: the impact of the epidemic continues to exceed expectations, substantial capital expenditure, tax exemption policy changes, the time to enter the Shanghai-Hong Kong Stock Connect is not as expected, and the liquidity risk caused by joint loans of the parent company is higher than expected.