\u3000\u3000 China Eastern Airlines Corporation Limited(600115) (600115)
Key points
Event: the company issued the announcement of pre loss of performance in 2021. The estimated net loss attributable to the parent company in 21 years is about 11 billion yuan – 13.5 billion yuan, which may increase slightly compared with the loss in the same period of last year (11.8 billion yuan); Among them, the net loss attributable to the parent company in the fourth quarter of 2021 is expected to be about 2.8 billion yuan to 5.3 billion yuan, an increase of 100 million yuan to 2.6 billion yuan compared with the loss in the same period of 2020 (2.7 billion yuan), which may increase significantly compared with the loss in the third quarter of 21 years (3 billion yuan). The company expects to deduct non net loss of about 12.2 billion yuan to 14.7 billion yuan in 21 years, which may increase slightly compared with the loss in the same period of last year (12.7 billion yuan); Among them, the company deducted the net loss not attributable to the parent company from about 3.5 billion yuan to 6 billion yuan in the fourth quarter of 21 years.
China’s aviation demand recovered and China’s route ask rebounded. In 2021, the company’s ask (available seat kilometers) increased by 5.7% compared with the same period in 2020 and decreased by 40.5% compared with the same period in 2019. Among them, China’s passenger transport demand recovered well. In 2021, the ask of Chinese routes increased by 15.8% compared with the same period in 2020 and decreased by 9.1% 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 95.7% and 88.5% respectively compared with the same period in 19 years. The company’s comprehensive seating rate in 2021 was 67.7%, a decrease of 2.8pct compared with the same period in 2020 and 14.4pct compared with the same period in 19 years. The company operated 752 passenger planes at the end of December 2021, an increase of 3.7% over the end of 2020, higher than the growth rate of the same period last year (0.3%).
The overall passenger turnover rebounded year-on-year, and the revenue increased year-on-year in the first three quarters of 21 years. China’s aviation demand recovered in 2021. Shanghai and other places where the company’s main base is located were less affected by the local epidemic in China, which led to a year-on-year increase of 1.4% in the passenger turnover of the company in 2021. Among them, the passenger turnover of Chinese routes, international routes and regional routes changed by + 10.8%, – 83.1% and – 10.5% respectively year-on-year. In the first three quarters of 2021, the company achieved an operating revenue of 52.5 billion yuan, an increase of 24.1% over the same period in 2020 and a decrease of 44% over the same period in 2019.
The sharp rise in oil prices had a negative impact, and the capital injection of major shareholders promoted the long-term development of the company. 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 – 13.2%, a year-on-year decrease of 7.1pct. The company completed the fixed increase in November 2021, which is mainly used to supplement working capital and repay debts. The major shareholders fully subscribed for about 10.8 billion yuan in cash. After the raised funds are in place, it will reduce the company’s asset liability ratio, improve the company’s solvency, reduce the company’s financial costs, further improve the financial situation and asset structure, and further improve the company’s ability to resist risks and achieve long-term sustainable development.
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 – 12.3 billion yuan and – 4.2 billion yuan respectively (originally – 6.7 billion yuan and + 1.7 billion yuan). We think the overseas aviation demand will recover significantly in the second half of next year, and raised the net profit forecast for 23 years to 3.2 billion yuan (originally 2.6 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.
