中国东航(600115):周期稳健上行 期待旺季弹性

China Eastern Airlines (600115): A steady upward cycle is expected, and flexibility is expected in the peak season

國海證券 ·  04/30  · Researches


China Eastern Airlines releases the first quarter report of 2023

In terms of business, the company transported 22.936 million passengers/yoy +74.7% in the first quarter of 2023, equivalent to 71.9% in the same period in 2019; ASK and RPK rose 52.5% and 79.6%, respectively, equivalent to 73.1% and 62.5% in the same period in 2019; the passenger occupancy rate was 70.6% /yoy+10.66 pcts, down 11.97 pcts from the same period in 2019.

On the financial side, in the first quarter of 2023, the company achieved operating income of 22.26 billion yuan/yoy +75.8%, or 75.8% of the same period in 2019; the net profit of the mother was -380 billion yuan, after deducting the net profit of the non-return mother - 394 billion yuan, a year-on-year loss of 3.96 billion yuan and 3.88 billion yuan respectively, down 5.809 billion yuan and 5.879 billion yuan respectively from the same period in 2019.

Key points of investment:

Travel demand picked up rapidly, and revenue increased 9.6 billion yuan year-on-year

Since the beginning of the year, demand for civil aviation travel has picked up rapidly. The number of passengers carried by the company in the first quarter of 2023 was 22.936 million passengers/yoy +74.7%, reaching 71.9% in the same period in 2019. Among them, 22.249 million passengers/yoy +71.2% were carried within China, and 687 million international and regional passenger carriers/yoy +398.1%, reaching 84.0% and 12.7% of the same period in 2019, respectively. The company's revenue in the first quarter increased 9.60 billion yuan year-on-year to 22.26 billion yuan/yoy +75.8%, reaching 74.1% in the same period in 2019.

The decline in oil prices compounded by increased capacity investment. CASK fell to the 0.50 yuan cost end in the first quarter, and operating costs in the first quarter increased 4.988 billion yuan year-on-year to 24.183 billion yuan/yoy +26.0%. The company's CASK fell to 0.50 yuan/yoy -17.4% during the reporting period, benefiting from the increase in the company's aircraft utilization level and the dilution of fixed costs and other items such as international oil prices.

On the expense side, the company's interest expenses increased by 324 million yuan year-on-year in the first quarter, but under the hedging effect of RMB appreciation, financial expenses increased by 58 million yuan to 1,224 million yuan/yoy +5.0% year-on-year.

Volume and prices rose sharply on May 1st, and flexibility can be expected during the peak season

Since the summer/autumn season on March 26, 2023, domestic flight volume has been rising steadily, international routes have resumed speeding up, the backlog of residents' travel demand for three years is being released, and the boom cycle has begun. The scheduled performance of domestic routes during the “May 1st” period exceeded expectations, volume and price have all exceeded 2019 levels, and market sentiment is expected to be further catalyzed. In the next second and third quarters, along with the marginal improvement in the difference between supply and demand and the flexibility of ticket prices, the large-scale market cycle is expected to be interpreted ahead of time.

As one of China's top three state-owned air transport groups, China Eastern Airlines is steadily advancing the construction of air networks in key strategic markets. In recent years, the company has continuously accelerated the construction of a strategic gateway hub in Beijing and continued to consolidate the Shanghai main base market. As international and domestic flight volumes continue to recover, the company's price elasticity is expected to be fully demonstrated during the upward phase of the cycle, and a reversal in performance can be expected.

Profit forecast and investment rating: Based on the pace of the company's business recovery, we adjusted the company's performance forecast. The company's revenue for 2023-2025 is 117.415 billion yuan, 158.487 billion yuan, and 168.160 billion yuan respectively. The net profit of the mother is 269 million yuan, 15.840 billion yuan, and 15.525 billion yuan respectively. Corresponding to the 2024-2025 PE is 7.29 times and 7.44 times respectively. We are optimistic about the price elasticity of the aviation industry in the upward phase of this cycle to maintain the “buy” rating.

Risk warning: (1) Risk of permanent loss: bankruptcy due to broken cash flow and large-scale issuance leading to passive dilution of shares; (2) risk of phased shocks: at the macro level, large economic fluctuations, another outbreak of the epidemic, major natural disasters; at the industry level, major policy changes, aviation accidents, increased industry competition, etc.; at the company level, cost control falls short of expectations, etc.; (3) If there is an error between the data in this report and the actual disclosed data, the announcement company shall prevail.

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