\u3000\u3000 Air China Limited(601111) (601111)
Event: the company issued the announcement of pre loss of performance in 2021. The net loss attributable to the parent company is expected to be about 14.5 billion yuan to 17 billion yuan in 21 years, an increase of 100 million yuan to 2.6 billion yuan compared with the loss in the same period of last year (14.4 billion yuan); In the fourth quarter of 2021, the company expects the net loss attributable to the parent company to be about 4.2 billion yuan to 6.7 billion yuan, which may increase significantly compared with the loss in the same period of 2020 (4.3 billion yuan), and expand by 700 million yuan to 3.2 billion yuan compared with the loss in the third quarter of 21 years (3.5 billion yuan). The company expects to deduct non net loss of 14.8 billion yuan to 17.5 billion yuan in 21 years, an increase of 100 million yuan to 2.8 billion yuan compared with the loss of 14.7 billion yuan in the same period of last year; Among them, the company deducted non attributable net loss of about 4.3 billion yuan to 7 billion yuan in the fourth quarter of 21 years.
China’s aviation demand recovered and China’s route ask rebounded. The company’s ask (available seat kilometers) in 2021 decreased by 2.3% compared with the same period in 2020 and 47.0% compared with the same period in 2019. Among them, China’s passenger transport demand recovered well. The ask of Chinese routes in 2021 increased by 7.7% compared with the same period in 2020 and decreased by 13.0% compared with the same period in 2019; The supply and demand of overseas airlines are still at a low level. In 2021, the ask of international routes and regional routes decreased by 96.2% and 78.2% respectively compared with the same period in 19 years. The company’s comprehensive seating rate in 2021 was 68.6%, a decrease of 1.7pct compared with the same period in 2020 and 12.4pct compared with the same period in 19 years. The company operated 746 passenger planes at the end of December 2021, an increase of 6.3% over the end of 2020, higher than the growth rate of the same period last year (1.2%).
The overall passenger turnover decreased year-on-year, and the revenue increased year-on-year in the first three quarters of 21 years. Although China’s aviation demand recovered in 2021, due to the relatively high proportion of the company’s original overseas routes, the benefit margin was small, and the strict prevention and control of the epidemic in Beijing, the company’s passenger turnover in 2021 still decreased by 4.7% year-on-year, of which the passenger turnover of Chinese routes, international routes and regional routes changed by + 4.5%, – 84.0% and – 30.5% year-on-year respectively. Based on the above, the company achieved an operating revenue of 57.5 billion yuan in the first three quarters of 2021, an increase of 18.6% over the same period in 2020 and a decrease of 44% over the same period in 2019.
The sharp rise in oil prices caused a negative impact, and Shandong Airlines and Cathay Pacific Airlines still brought investment losses. The annual average price of Brent crude oil in 2021 was about $70.9/barrel, which was significantly higher than that in 2020 ($43.0 / barrel), putting great pressure on the company’s operating cost. Considering the superimposed cost rigidity, the company’s gross profit margin in the first three quarters of 2021 was – 9.9%, a year-on-year decrease of 0.6pct. In addition, Shandong Airlines and Cathay Pacific Airlines, which the company participated in, still did not turn losses into profits. Among them, Shandong Airlines lost 1.6-2 billion yuan in 2021, which was slightly lower than the loss in 2020 (2.4 billion yuan); Cathay Pacific lost HK $7.57 billion in the first half of 2021, a decrease of HK $2.3 billion compared with the loss in the same period in 2020 (HK $9.87 billion).
Investment suggestion: the epidemic situation outside China has been repeated, and the recovery of air passenger transport demand has been negatively impacted. We believe that the growth logic and location advantages of head airlines have not changed substantially due to the epidemic situation; With the continuous advancement of covid-19 vaccine / treatment technology, the demand for air passenger transport will gradually recover, and the revaluation of the company’s value is a deterministic event. Considering that the covid-19 epidemic lasted longer than expected, we lowered the company’s net profit forecast for 21-22 years to – 16.2 billion yuan and – 5.5 billion yuan respectively (originally – 8 billion yuan and + 1.2 billion yuan). We believe that overseas aviation demand will recover significantly in the second half of next year, and raised the net profit forecast for 23 years to 3.8 billion yuan (originally 3 billion yuan); Based on the gradual improvement of the company’s fundamentals in the future, maintain the “overweight” rating of the company’s A-Shares and H shares.
Risk warning: the duration of covid-19 epidemic exceeded market expectations; The sharp decline of macro economy leads to the decline of industry demand; Sino US trade frictions continue to ferment, and the RMB exchange rate fluctuates greatly; Crude oil prices rose sharply.
