Air China (601111): Provide low-cost growth costs and improve performance


Air China (601111): Provide low-cost growth costs and improve performance

Investment Highlights: Events / News: On October 30, Air China released the 2019 third quarter report. Air China achieved operating income of 1,030 in the first three quarters of 2019.

77 天津夜网 ppm, an increase of 0 in ten years.

2%, achieving net profit of 67%.

62 ppm, a decrease of 2 per year.

5%, of which 377 achieved operating income in the third quarter.

64 ppm, a decrease of 2 per year.

26%, achieving net profit attributable to mother 36.

23 ppm, a ten-year increase4.

43%, in line with the performance expectations given by us in early October.

The growth rate of supply is still low, and demand dragged down to the lowest level.

In the first three quarters of 2019, affected by factors such as capital airport flight maintenance and slower aircraft speeds, Air China’s available seat kilometer (ASK) increased by 5 times.

6%, of which only 4 in China.

5%, which is significantly lower than the industry average, and the supply continues to grow at a low rate even when the flight resources are relatively scarce.

Although Q3 supply only increased by 5.

35%, but revenue declines by 2 every year.

At 26%, seat-km revenue decreased significantly, and demand was slightly weak.

Air China’s core hubs are Beijing, Shenzhen, and Chengdu. The proportion of public and business travelers is higher than the industry average. The overall demand is more obviously affected by the macro economy.

However, the supply during the winter and spring seasons is still tight, and the overall supply growth of the industry will continue in the short term. After the demand has stabilized, the income level will increase.

Costs have dropped significantly under low oil prices, and oil exchange benefits have gradually materialized.

According to the estimated price of aviation kerosene, Air China’s fuel costs fell by 5% in the third quarter of 2019, driving operating costs down further4.

At 58%, the shortage of oil deduction units was basically flat due to changes in lease specifications, but Air China’s cost control efficiency was still significantly higher than the industry average.

After a rapid depreciation in July, the RMB exchange rate has remained relatively stable, and the current depreciation rate is about 2.

7%, which is less than the average overall rate of last year. Although the exchange loss is basically the same as last year due to the greater exchange rate elasticity, the impact of the exchange rate has gradually weakened.

A series of breakthrough factors will improve in the future. The incremental valuations caused by exchange rate changes will diminish the value, which will help Air China’s performance continue to rise.

The benefits of Daxing Airport’s commissioning are gradually showing, and international passengers at Capital Airport are expected to accelerate growth.

Daxing Airport was officially put into operation in September. Since the 19/20 winter and spring season, the capital airport flights have begun to be relocated in phases.

After the relocation, Air China will account for more than 50% of the capital airport, which will help Air China to form a wave of international flights, improve transit efficiency, and further strengthen the hub function of the capital airport.

The improvement of the improved aircraft will gradually reduce the cost level of the cockpit, so that the accelerated growth of international passenger growth is conducive to further improving the revenue level of Air China’s seat kilometers and achieving a significant increase in operating profit margins.

Investment suggestion: Judging from Air China’s third quarter report and operating data for 2019, short-term factors such as the suppression of major business requirements on business and business have a certain impact on Air China’s performance, but Air China still achieves a rebound in performance through efficient cost control.

Q3 Air China has achieved a rebound in performance. Supply and demand will continue to improve after further supply decline in the future. Long-term fundamentals continue to improve. The margin of oil prices will improve, and profit elasticity will increase, and investment value will become prominent.

Due to the obvious depreciation of the Q3 exchange rate, after adjusting the exchange rate 南宁桑拿 center, we adjusted the net profit return to motherhood for 2019-2021 to 77.

9.4 billion, 109.

7.5 billion, 121.

9.1 billion (97 before adjustment).

8.4 billion, 119.

09 million yuan, 156.

33 ppm), corresponding to the current expected PE is 15 times, 11 times, 10 times, but the current PB has fallen to the lowest interval in 10 years, the probability of decline is biased, maintaining the “Buy” rating.

Risk reminders: Macroeconomic fluctuations, rising oil prices, rapid depreciation of currency exchange rates, and accidents such as air crashes.