\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 115 China Eastern Airlines Corporation Limited(600115) )
Event:
China Eastern Airlines Corporation Limited(600115) issue annual report for 2021
In terms of business, the company transported 790991 million passengers / yoy + 6.00% in 2021, equivalent to 60.71% of the level in 2019; Ask and RPK increased by 5.67% and 1.43% respectively year-on-year in 2020, equivalent to 59.46% and 49.06% of the level in 2019; The occupancy rate was 67.71% / yoy-2.83 PCT, a year-on-year decrease of 14.35 PCT in 2019.
Among them, 4q2021 company transported 162919 million passengers / yoy-32.06%, reaching 50.45% of the level in the same period in 2019; Ask and RPK decreased by 19.96% and 31.85% respectively year-on-year in 2020, reaching 53.25% and 40.57% in the same period in 2019; The occupancy rate was 61.22% / yoy-14.86 PCT, down 19.13 PCT year-on-year in 2019.
In terms of finance, the company achieved an operating revenue of 67.127 billion yuan / yoy + 14.48% in 2021, 55.54% of the same period in 2019; The net profit attributable to the parent company was -12.214 billion yuan / yoy-3.20%, deducting the net profit not attributable to the parent company was -13.541 billion yuan, a year-on-year decrease of 627.50% in 2019.
Among them, 4q2021 achieved an operating revenue of 14.626 billion yuan / yoy-10.48%, up from 53.26% in the same period in 2019; The year-on-year net profit attributable to the parent company was -4.87 billion yuan, with a year-on-year decrease of -4.87 billion yuan and a year-on-year net profit attributable to the parent company of -4.87 billion yuan.
Key investment points:
The recovery was again disturbed by the epidemic, the seat revenue rose, and the annual revenue increased by 14.47%. In 2021, China’s epidemic rebounded periodically, and the company’s recovery process was disturbed. Ask increased slightly by 5.67% year-on-year. In terms of quarters, the overall demand recovery trend of the Chinese market in the second quarter was good, while the summer transportation peak season in the third quarter was impacted by the multi-point spread of the epidemic, and the industry recovery process was greatly disturbed. In the off-season of the industry in the fourth quarter, due to the continuous impact of the epidemic, the company’s ask decreased month on month, only 50% of the same period in 2019. However, driven by the recovery of Chinese business, China Eastern Airlines’ annual rasK reached 0.34 yuan / yoy + 4.22%, equivalent to 82.50% in the same period in 2019.
In terms of freight transportation, benefiting from the strong demand of air freight market under the epidemic, the freight rate level has remained high for a long time. The company benefited from the high prosperity of the air cargo market and realized a cargo and mail revenue of 8.309 billion yuan / yoy + 69.74%.
The rising cost of oil price is under pressure, and the contribution of exchange earnings is reduced. In terms of cost, with the continuous rise of international oil price, the average oil distribution in 2021 is about 64% higher than that in 2020, the superimposed oil consumption of the company is 13.84% higher than that in 2020, and the annual aviation oil cost of China Eastern Airlines is increased by 6.753 billion yuan. At the same time, due to the increase of passenger travel demand and the policy of halving social security collection, the company’s oil deduction cost increased slightly by 4.36% year-on-year, but the oil deduction cask was 0.37 yuan / yoy-1.24%.
In terms of expenses, due to the reduction of RMB appreciation in 2021, the company realized a net exchange gain of RMB 1.619 billion in 2021, a year-on-year decrease of 38.14%. After combining the increase of 2.805 billion yuan in loan and creditor’s rights interest expenses and 3.391 billion yuan in lease interest expenses caused by the company’s debt structure adjustment in 2021, the company’s annual financial expenses were 3.880 billion yuan, a year-on-year increase of 1.263 billion yuan.
The fundamentals are at the bottom of the large cycle, and the medium and long-term starting point may start this year
Since the third quarter of 2021, the market is expected to drive the sector repair first, but the industry fundamentals are still at the bottom of the large cycle. Due to the strong infectivity of the mutant virus Omicron, the epidemic situation in China was sporadic or normal in the first half of 2022. Considering the reality of China’s per capita medical resources and immune barrier, we expect to wait until the third quarter before looking forward to the issues related to opening up. We are confident that travel will return to normal in the future, but the impact and duration of the epidemic have repeatedly exceeded expectations.
Recently, the New Coronavirus treatment plan (trial version ninth) announced that China’s epidemic had entered the second half, and the long-term starting point of the aviation industry will be opened this year. But the turning point still needs to be patient. In the current cycle caused by covid-19 epidemic, the aviation industry has two logics: Valuation repair and supply-demand elasticity. As one of the three major airlines in China, China Eastern Airlines has a dual core hub in Beijing and Shanghai, and adopts the whole track layout operation mode. At present, affected by the rebound of local epidemic and safety accidents, the prosperity of the industry is at a low level. When the upward phase of the cycle comes, the company is expected to fully benefit.
Profit forecast and investment rating: it is estimated that the company’s revenue from 2022 to 2024 will be 76.232 billion yuan, 103253 billion yuan and 131090 billion yuan respectively, and the net profit attributable to the parent company will be -11.352 billion yuan, 3.997 billion yuan and 9.323 billion yuan, corresponding to PE of -7.95 times, 22.57 times and 9.68 times. Considering that the fundamentals of the aviation industry are at the bottom of the large cycle, the company will fully benefit from the upward stage of the industry cycle in the future and maintain the “overweight” rating.
Risk tips: (1) permanent loss risk: Bankruptcy caused by cash flow fracture and passive substantial dilution of shares caused by huge additional issuance at the bottom; (2) Periodic impact risk: at the macro level, the economy fluctuates greatly, the epidemic breaks out again, and major natural disasters, vaccination and related drug research and development are blocked; In terms of industry, major policy changes, aviation accidents, intensified industry competition, etc.
