\u3000\u3000 China Southern Airlines Company Limited(600029) (600029)
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 11.3 billion yuan to 12.8 billion yuan in 21 years, an increase of 500 million yuan to 2 billion yuan compared with the loss in the same period of last year (10.8 billion yuan); Among them, the net loss attributable to the parent company in the fourth quarter of 2021 is expected to be about 5.2 billion yuan to 6.7 billion yuan, an increase of 1.8 billion yuan to 3.3 billion yuan compared with the loss in the same period of 2020 (3.4 billion yuan), and an increase of 3.8 billion yuan to 5.3 billion yuan compared with the loss in the third quarter of 21 years (1.4 billion yuan). The company expects to deduct non net loss of about 11.7 billion yuan to 13.5 billion yuan in 21 years, which may increase slightly compared with the loss in the same period of last year (11.7 billion yuan); In the fourth quarter of the 21st year, the deduction of non parent net loss was about 5.2 billion yuan to 7 billion yuan.
China’s aviation demand recovered, and the company’s Chinese route ask rebounded. The company’s ask (available seat kilometers) in 2021 decreased by 0.37% compared with the same period in 2020 and 38.0% 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 5.9% compared with the same period in 2020 and decreased by 12.7% 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 92.3% and 89.4% respectively compared with the same period in 19 years. The company’s comprehensive seating rate in 2021 was 71.3%, a decrease of 0.21 PCT compared with the same period in 2020 and 11.6 PCT compared with the same period in 19 years. The company operated 878 aircraft at the end of December 2021, an increase of 1.3% over the end of 2020, higher than the growth rate of the same period last year (0.6%).
The overall passenger turnover decreased slightly year-on-year, and the revenue increased year-on-year in the first three quarters of 21 years. Although China’s aviation demand has recovered in the past 21 years, Guangzhou and other places where the company’s main base is located are still negatively impacted by the local epidemic. The overall passenger turnover of the company in the past 21 years has decreased by 0.66% year-on-year, of which the passenger turnover of Chinese routes, international routes and regional routes has changed by + 5.8%, – 69.0% and – 36.2% year-on-year respectively; Due to the repeated overseas epidemics, air cargo still maintained a high outlook, and the company’s revenue per ton kilometer of cargo and mail increased by 6.3% year-on-year in 21 years. The company’s operating revenue in the first three quarters of 21 years was 78.5 billion yuan, an increase of 20.1% over the same period of 20 years and a decrease of 32.7% over the same period of 19 years.
The whole cargo aircraft business continued to contribute profits, and the major shareholders injected capital to improve the company’s sustainable operation ability. 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 costs. However, relying on the good performance of freight business, the company’s gross profit margin in the first three quarters of 2021 was 0.95%, which changed from negative to positive year-on-year. In addition, the company recently announced that the additional issuance (A shares of no more than 4.5 billion yuan and H shares of no more than HK $1.8 billion) is used to supplement working capital and working capital, which is subscribed by major shareholders and their wholly-owned subsidiaries, which will enhance the company’s sustainable operation ability and further enhance its core competitiveness.
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. Based on the longer duration of covid-19 epidemic than expected, we will not consider additional issuance for the time being. We will lower the company’s net profit forecast for 21-22 years to – 11.9 billion yuan and – 3.1 billion yuan respectively (originally – 5.3 billion yuan and + 1.9 billion yuan). We think there will be a significant recovery in overseas aviation demand in the second half of next year, and raise the net profit forecast for 23 years to 3.2 billion yuan (originally 2.9 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.
