Juneyao Airlines Co.Ltd(603885) (603885)
Over the past 15 years, we have forged ahead and refined our internal management skills. The company was founded in 2006 and listed on A-share market in 2015. The airline network covers China’s economically developed provincial capital cities, key tourist cities, Hong Kong, Macao and Taiwan, and radiates surrounding countries. It holds cross shareholdings with China Eastern Airlines to explore the cooperation mode with state-owned capital. Since its listing, the company has developed well, with a compound growth rate of revenue of 15.5%. The impact of the epidemic was gradually digested during the year. In the first half of 2021, the operating revenue reached 6.05 billion yuan, exceeding the level in the same period in 2017.
Two wheel drive seizes the market segment and increases the quantity and quality of aviation network. The company adopts the operation strategy of “dual brand, dual hub and dual mode”. The main brand is deeply rooted in Shanghai, positioning full-service aviation. The sub brand is based in Guangzhou, quickly developing the low-cost aviation market, forming complementary effects among brands, enjoying hub advantages and covering all kinds of customers. The company maintained the growth of transportation capacity, the fleet size increased from 41 in 14 years to 108 at present, and the aviation network resources were of high quality. Compared with the same period in 16 years, the compound growth rate of class I mutual flight of the company reached 18% in the latest summer and autumn aviation season.
Multifaceted cost control and refinement. The company supports the competitive price level with the optimal cost structure. The fleet operation implements the concept of unification and rejuvenation, obtains the price advantage of aircraft procurement and aviation material procurement, saves training and maintenance costs, and the unit operating cost is lower than that of the three major airlines. The average unit operating cost and average unit fuel deduction cost in 2018-2020 are 0.34 yuan and 0.25 yuan respectively, It is 0.425 yuan and 0.307 yuan lower than the average level of the three major airlines. The operating efficiency is excellent, and the daily utilization rate and seating rate of aircraft are high. In the first half of the year, the seating rate of the whole fleet is 78.01%, and the daily utilization rate of aircraft is 9.23 hours.
The bottom of the cycle is waiting for dawn, and the market demand is cashed in by stages. The industry is at the bottom of the cycle, and the “steady growth” policy is implemented. We believe that the recovery of the industry can be divided into two stages: in the first stage, the Chinese market continues the current recovery trend, the Chinese market has great room for improvement to support the long-term upward trend of the industry, and the impact of local epidemic situation is gradually weakened; In the second stage, the entry restrictions of various countries were relaxed, the recovery speed of the supply side of international routes was weaker than that of the demand side, and the company’s international routes were repaired quickly.
Investment advice
It is estimated that the company’s EPS from 2021 to 2023 will be -0.11 yuan, 0.60 yuan and 0.90 yuan respectively. We believe that the company’s dual brand and dual hub operation strategy can effectively expand the passenger group coverage and increase route resources, and implement the concept of optimal cost structure. With the rise of the prosperity of the aviation market in the post epidemic era, the company’s profitability is expected to accelerate the repair. Give the company 30 times PE valuation, corresponding to the target price of 18 yuan in 2022, and give a “buy” rating for the first time.
Risk statement
Risk of sharp rise in aviation fuel price; Risk of a new round of epidemic outbreak; Exchange rate fluctuation risk; The opening of international routes may be lower than expected.
