\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 029 China Southern Airlines Company Limited(600029) )
Event: China Southern Airlines Company Limited(600029) released the first quarterly report of 2022. In the first quarter, the company achieved a revenue of 21.471 billion yuan, a year-on-year increase of + 1.03%; The net profit attributable to the parent company was -4.496 billion yuan, with a year-on-year increase of 490 million yuan.
The traffic volume of 2022q1 company is slightly better than the overall level of the industry, and the ticket price has rebounded significantly. In 2022q1, the overall / China / international RPK growth rate was – 15.14% / – 15.15% / – 14.03% respectively, recovering to 42.20% / 60.12% / 3.77% in 2019. In the same period, the passenger turnover of the whole industry recovered to 41.14% in 2019. The company’s traffic volume was slightly better than the overall level of the industry. The main reason was that the epidemic situation in South China was well controlled in the first quarter, and the company’s second and third tier urban routes accounted for a large proportion, with relatively light damage. The overall / China / international seating rate of 2022q1 was 65.29% / 65.73% / 54.14% respectively, with a year-on-year increase of -4.0pts / – 4.8pts / + 10.8pts, compared with -17.6pts / – 16.8pts / – 29.8pts in 19 years. Under the impact of the epidemic, China’s seating rate continued to decline, and the international line seating rate rebounded and remained at a low level. On the ticket price side, the company’s revenue still increased slightly when RPK decreased by 15% year-on-year. It is expected that the ticket price will increase significantly year-on-year, which is mainly affected by the company’s active price policy and the increase of fuel surcharge. According to our fare tracking data, the average fare of 2022q1 core routes exceeds that of 2019.
The rise in oil prices has led to an increase in costs and the overall stability of costs. The operating cost of 2022q1 company was 24.921 billion yuan, a year-on-year increase of + 6.22%, and the unit ask cost was 0.56 yuan, a year-on-year increase of + 17.98%. We think it is mainly affected by the continuous rise of aviation fuel price, and the average price of 2022q1 aviation fuel was + 55% year-on-year. The year-on-year growth rate of the company’s unit ask cost was lower than that of Air China (+ 31.56%) and China Eastern Airlines (+ 27.10%), mainly because the company was less impacted than its peers in the first quarter, and the passenger seat rate was higher than that of Air China (61.30%) and China Eastern Airlines (59.97%). On the expense side, in 2022q1, in addition to financial expenses, the comprehensive expense rate was 8.82%, with a year-on-year rate of -0.51pts, which remained stable as a whole. The US dollar depreciated by 0.47% against the RMB in 2022q1 and appreciated by 0.26% in 2021q1. Therefore, the exchange income increased in the first quarter, and the financial expense rate was 5.43%, year-on-year -1.77pts.
It is expected that the second quarter will still be affected by the epidemic, and the company’s performance is expected to continue to be better than the industry average. The introduction of transport capacity maintained a low growth rate and was optimistic about the performance reversal after the epidemic. Since April, the epidemic situation in Shanghai has continued to develop and spread in many places. It is expected that flights in core cities such as Beijing and Shanghai will still be impacted in the second quarter, and the performance of routes in South China and second and third tier cities is expected to be better than the industry average. Pay attention to the inflection point of the epidemic and the progress of China’s demand recovery in the second half of the year. According to the introduction plan of the company’s annual report, 59, 66 and 22 aircrafts were net introduced from 2022 to 2024, with growth rates of 6.72%, 7.04% and 2.19% respectively. At present, the introduction plan is basically reflected in the situation of hand orders. By the end of the first quarter of 2022, one aircraft was net introduced. Affected by the epidemic, the actual growth rate this year is expected to be lower than the planned growth rate. With the recovery of demand after the epidemic, the industry is expected to have a significant difference between supply and demand. The market-oriented reform of superimposed fare continues to promote, open the space of price elasticity, and look forward to the performance reversal after the recovery of the epidemic.
Investment suggestion: we expect that with the improvement of China’s epidemic situation, China’s line demand will usher in an inflection point; After the epidemic situation stabilizes, international routes are expected to be gradually explored and liberalized through pilot methods. The scale of the company’s fleet is leading in the industry, with a high proportion of Chinese lines and high performance flexibility. We expect the net profit attributable to the parent company from 2021 to 2023 to be – 10.64 billion yuan, 5.55 billion yuan and 10.18 billion yuan respectively, corresponding to – 10, 20 and 11 times of the current share price PE, maintaining the “Buy-A” rating.
Risk tip: the recovery of aviation demand is lower than expected, the oil price rises sharply and the RMB depreciates sharply.
