Main points of investment

23Q1 made a profit of about 360 million yuan, returning to 75% in 19 years, and its performance exceeded expectations on April 27. Spring and Autumn Airlines released its annual report of 2022 and the first quarterly report of 2023. (1) Quarterly report 2023:

23Q1, the company's operating income was 3.86 billion yuan, an increase of 64% over the same period of 22Q1 and 6% of the same period last year; the operating cost was 3.38 billion yuan, an increase of 12% over the same period of 19Q1; the return net profit was 356 million yuan, and returned to 75% of 19Q1; after deducting 341 million yuan of non-return net profit, it was restored to 74% of 19Q1. (2) 2022 Annual report: the company's operating income in 22 years is 8.37 billion yuan, which is-23% compared with the same period last year; the operating cost is 11.59 billion yuan, which is + 2% over the same period last year; the net profit is-3.04 billion yuan, and the profit is 40 million yuan in 21 years. Of this total, 22Q4's operating income was 1.76 billion yuan, 22 years-21% compared with the same period last year, the net profit was-1.3 billion yuan, and the loss increased by 1.18 billion yuan compared with the same period last year.

Operating data and capacity planning: RPK in March has a net increase of 7, 14 and 10 aircraft over the 19 + 5% Shenzhen 23-25 year plan

Production data: according to the company announcement, 1) in 2022, the company's ASK, RPK and occupancy rate were-27%,-34% and-8pct respectively compared with the same period last year. 2) 23Q1, the company's ASK, RPK and occupancy rate are + 5%, + 26% and + 15pct respectively compared with the same period last year, and + 2%,-4% and-5pct respectively compared with the same period of 19Q1. Among them, from January to March, the company's ASK was-9%, + 5% and + 10% respectively compared with the same period last year, and the occupancy rate was-5%,-7% and-4% respectively compared with the same period last year.

Fleet size and capacity planning: the company's fleet size was 116 at the end of 22, with a net increase of 3 in that year. The final fleet of 23Q1 was 117aircraft, a net increase of one over the end of 22. According to the 22 annual report plan, the company plans to net increase 7, 14 and 10 aircraft respectively in 23-25, corresponding to 147aircraft fleet size at the end of 25 and about 8% CAGR in 19-25, which we expect to far exceed the industry supply growth rate of 3%. 4%.

Income analysis: 23Q1 unit RPK operating income increased by 10% over 19 years, unit ASK non-oil cost compared with 19 years-1%

Revenue side: 1) in 22 years, the revenue of passenger kilometers was 0.358 yuan, + 17% compared with the same period last year, and-1% compared with the same period last year. Domestic passengers charge 0.345 yuan, 21 years + 15%, 19 years-4%; international passengers charge 3.152 yuan, 21 years + 30%, 19 years + 757%; and regional routes charge 0.93 yuan, 21 years + 109%, 19 years + 142%. 2) 23Q1, the operating income per unit RPK is 0.429 yuan, which is + 10% compared with the same period last year.

Cost side: 1) in 22 years, the unit ASK operating cost is 0.382 yuan, + 40% compared with the same period last year, of which the unit fuel cost is 0.130 yuan, + 60% compared with the same period last year, mainly because the oil price is + 73% compared with the same period last year; the unit non-oil cost is 0.252 yuan, + 31% compared with the same period last year, mainly because the utilization rate is low. 2) 23Q1, the unit operating cost is 0.326 yuan, + 10% compared with the same period last year, of which the unit fuel cost is 0.123 yuan, which is + 33% compared with the same period last year. This is mainly due to the 46% increase in oil prices and the 0.203 yuan per unit non-oil cost in 19 years compared with the same period last year, which is mainly due to the increase in utilization rate and dilution of fixed costs.

Cost side: 1) in 22 years, the unit ASK sales fee was 0.006 yuan, which was + 12% per unit ASK compared with the same period last year, and the unit ASK management fee was 0.006 yuan. At the end of 22, the RMB depreciated by 9.2% compared with the end of last year, resulting in an exchange loss of 126 million yuan. 2) 23Q1, unit ASK sales expenses 0.005 yuan, unit ASK management expenses 0.005 yuan, year-on-year 19 years-0.1% and-14% respectively. At the end of 23Q1, the RMB appreciated by 1.3% compared with the end of 22. Assuming that the company's foreign currency exposure is consistent with that at the end of 22, we expect the 23Q1 exchange income to be about 20 million yuan.

Outlook: the aviation big cycle has arrived, the spring and autumn performance is expected to exceed expectations, the growth rate of industry capacity supply is expected to slow down, there is expected to be an obvious mismatch between supply and demand in the process of demand recovery in the future, and the profit elasticity of the Aviation Division is expected to be considerable under the expected price increase. As the leader of the low-cost Aviation Division, the company is expected to show greater fare flexibility under the price increase. With the extreme cost control, the large-cycle performance is expected to exceed expectations.

Profit forecast and investment suggestion

Assuming that the average ticket price in 24 years is 10% higher than that in 19 years, we expect the company's 23-25 year net profit to be 24.4,41.6 and 4.42 billion yuan respectively. With reference to the historical valuation center, the company is given a 24-year PE of 20-25X with a target market value of 85 billion yuan and a "buy" rating corresponding to the target price of 86.80 yuan per share.

Risk tips: demand is lower than expected, oil prices and exchange rates fluctuate sharply.