\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 111 Air China Limited(601111) )
Event: the company achieved a revenue of 74.53 billion yuan in 2021, a year-on-year increase of 7.23%; Deducting non net profit of -17.056 billion yuan, the loss continued to expand compared with 14.74 billion yuan in the same period of 20 years.
After deducting the impact of investment income and exchange income, the operating loss increased year-on-year: the exchange gain and loss of the company in 2021 was 1.2 billion yuan, lower than 3.6 billion yuan in the same period of 20 years; On the other hand, the company’s investment loss in 21 years was 750 million yuan, significantly better than the loss of 5.92 billion yuan in the same period in 20 years (mainly due to the significant loss reduction of Cathay Pacific Airlines through restructuring and development of cargo flights). When the “investment income + exchange income” in 21 years is more favorable than that in 20 years, the loss is still expanding, which is enough to show that the company’s operation level is under great pressure.
The epidemic has led to a decline in the passenger capacity of Chinese routes and further pressure on operation under high oil prices: in 2021, the company’s supply of transport capacity of Chinese routes increased by 7.6% year-on-year, but affected by the epidemic, the demand was sluggish, and the passenger capacity fell by 2.1 percentage points year-on-year to 69.6%.
The sluggish demand leads to the rise of oil price, which can not be well transmitted to the ticket price end. Affected by the sharp rise in oil prices, the company’s unit ask fuel cost increased from 0.095 yuan to 0.136 yuan in 21 years, and increased by 0.041 yuan / seat kilometer. However, the seat kilometer revenue of Chinese routes increased from 0.334 yuan to 0.370 yuan, which is lower than the increase in unit cost caused by the rise in oil prices.
The pressure of epidemic prevention and the change of route structure led to the increase of unit non oil cost: in the past 21 years, the company’s unit ask takeoff and landing cost increased by 7.1%, unit maintenance cost increased by 10.1% and other unit costs increased by 11.6%, resulting in the increase of unit non oil cost from 0.390 yuan / seat kilometer to 0.427 yuan / seat kilometer.
The increase of unit cost is mainly due to two reasons. First, the proportion of international long routes of the company has further decreased compared with that in the past 20 years. The proportion of the company’s international route capacity in normal years is close to 40%, which will drop to 12% in 2020 and further reduce to 2.7% in 21 years. As the voyage of international routes is much longer than that of Chinese routes, the unit non oil cost will be significantly lower than that of Chinese routes, and the decline in the proportion of international long routes will naturally lead to the rise of unit cost. The second factor is that the greater epidemic prevention pressure leads to the increase of personnel and material consumption. When the aircraft utilization rate is difficult to improve, it will also directly lead to the increase of unit non oil cost.
The introduction of aircraft slowed down significantly: the company’s 20-year annual report disclosed that 56 aircraft were planned to be introduced in 21 years and 6 aircraft were withdrawn. In 21 years, 37 aircraft were actually introduced and 1 aircraft was withdrawn. It can be seen that affected by the epidemic, the company is consciously delaying the introduction of aircraft. We expect that the aircraft introduction of the company and the whole industry will be limited to a low level in the next 2-3 years to reduce the pressure of capital expenditure on cash flow.
The business situation is expected to improve this year, but the challenge is still severe: last year, we summarized the reasons why Air China lost the most in the three major airlines, including: 1 The proportion of wide body aircraft of Air China is the highest among the three major airlines; 2. Beijing, as the capital, has particularly strict epidemic prevention standards; 3. Stripped off the cargo business and missed the boom period of international air cargo; 4. Cathay Pacific, a shareholder, suffered serious losses. Among them, the fleet structure factor is the most critical.
At present, although Cathay Pacific has significantly reduced its losses, a high proportion of wide body aircraft can not play a role in Chinese routes, which still seriously limits the performance of Air China in the epidemic stage. Before the reopening of international routes, Air China will probably be the company with the most serious losses among the three major airlines.
We expect that international routes will be liberalized step by step, but will fully recover at least in 2023 or even 2024. Therefore, we expect that the company will still be in a state of loss in 22-23 years, but will continue to reduce losses.
Profit forecast and investment suggestions: it is estimated that the net profit of the company from 2022 to 2024 will be -91.1, – 3.67 and 4.51 billion yuan respectively, and the corresponding EPS will be -0.63, – 0.25 and 0.31 yuan respectively. Considering the great uncertainty of the duration of the epidemic, we maintain the “neutral” rating of the company.
Risk warning: the duration of the epidemic exceeds the renewal period; Changes in civil aviation policies; Large fluctuations in oil prices and exchange rates, etc
