China’s epidemic situation is still repeated, and passenger transport demand is under pressure in the short term. We observe the trend of passenger transport demand in the future by tracking the PMI index of non manufacturing industry, the zero growth rate of social security, the number of Chinese tourists in major countries and the import and export amount of duty-free goods. In March 2022, the PMI index of non manufacturing industry decreased by 3.2pct to 48.4% month on month. Since September 2021, the outlook of non manufacturing industry fell to the contraction range for the first time. The weakening of the prosperity index of service industry is the main reason driving the contraction of business activities in non manufacturing industry. Among them, the PMI of service industry decreased by 3.8pct to 46.7% in March, which is mainly due to the slowdown of market activities in service industry, railway transportation, air transportation, accommodation Catering and other contact gathering industries are greatly affected by the epidemic. From January to February 2022, the social zero rose by 6.7% year-on-year. Excluding the interference caused by the low base in the previous two years, the month on month growth rates in January and February this year were 0.9% and 0.3% respectively, both higher than the 0.1% in December 2021, indicating that the overall consumption is improving. From January to February 2022, the total import and export amount of national duty-free goods increased by 12.8% year-on-year. In February 2022, the number of Chinese tourists from Hong Kong, Taiwan and Japan continued to remain at a low level of less than 10000. In February 2022, the number of mainland residents visiting Australia was 609000, a month on month decrease of 5.1%.
The growth rate of import and export fell, and the growth rate of freight demand fell year-on-year. We observe the change trend of freight volume in the future by tracking the manufacturing PMI index, import and export growth, industrial added value growth and fixed asset investment growth. In March 2022, the manufacturing PMI index was 49.5%, down 0.7pct month on month, mainly due to the impact of China’s epidemic and geopolitical changes, resulting in temporary production reduction and shutdown of some enterprises in some regions and the decline of logistics efficiency; In addition, the PMI of new orders in March was 48.8%, down 1.9pct month on month, and both ends of supply and demand fell simultaneously. From January to February 2022, the added value of industries above designated size increased by 7.5% year-on-year (the previous value was 4.3%), and the three-year average growth rate was 2.5% based on 2019. From January to February 2022, the cumulative year-on-year growth rate of fixed asset investment was 12.2% (the previous value was 4.9%). Based on 2019, the average growth rate in the three years was only 4.6%; From the perspective of month on month growth, fixed asset investment is in the process of improvement as a whole. From January to February 2022, the import and export volume increased by 8.1% year-on-year, of which the export growth rate from January to February was 16.3%, down from the high at the end of last year. The main reasons are: 1. The high base in the same period last year; 2. The epidemic situation in China was repeated around the Spring Festival; 3. After years in Europe and the United States, the labor force and supply chain accelerated recovery, and the supply-demand gap began to converge.
The exchange rate of RMB against the US dollar fluctuated slightly, and the price of crude oil fluctuated at a high level. Based on the cost structure of the transportation company, we track the 7-day repo interest rate, LPR over five years and US dollar exchange rate to observe the change trend of financial expenses; Track the oil price to observe the change trend of operating cost. On the whole, the 7-day repo rate fluctuated slightly, and the LPR over five years was not adjusted in March 22; The exchange rate of RMB against the US dollar has fluctuated slightly recently, and is now about 6.35 yuan / US dollar; Brent crude oil price fluctuates at a high level and is currently above US $100 / barrel.
Investment suggestion: the epidemic situation in China is still repeated, and the passenger transport demand is under pressure in the short term; We believe that with the continuous advancement of covid-19 vaccine / treatment technology, the demand for air passenger transport will gradually recover in the next two years, and the revaluation of relevant companies is a deterministic event. We maintain the industry’s “add on” rating, and we maintain the industry ” “hold on” rating. It is recommended that 601 Air China Limited(601111) and China Express Airlines Co.Ltd(002928) .
Risk analysis: 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.
