\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 111 Air China Limited(601111) )
Key investment points
(1) the company’s passenger transport has been steadily repaired, and the freight transport has maintained a high landscape. In 2021, the passenger transport revenue reached 58.317 billion yuan, accounting for 78.24% of the revenue, with a year-on-year increase of 2.59 billion yuan. Among them, the epidemic situation was frequently disturbed in 2021, and the company’s core base Beijing market was more strict due to the epidemic prevention policy. The company’s annual passenger transport capacity fell slightly by 2.3% year-on-year. In 2021, the company’s passenger kilometer revenue was 0.5574 yuan, an increase of 9.9% over the same period in 2020 and 4.4% over the same period in 2019. The pricing strategy of volume and price protection led to a year-on-year increase of 9.85% in passenger kilometer revenue, which was the main factor in the repair of passenger revenue. Air cargo still maintains a high outlook.
(2) the card is located at the core hub of the capital airport, and the Chinese routes are of high quality. Air China has now formed a four corner diamond network with Beijing, Chengdu, Shanghai and Shenzhen, covering the areas with the most developed economy and the highest population density in China, providing high-quality products and services for medium and high-end business passengers. Air China’s market share of high-quality routes is significantly higher than that of other companies. By locking in core resources such as high-quality routes and moments, Air China builds natural competitive barriers, so as to improve its competitive advantage. Among the top 15 routes, 9 companies have the highest market share and 6 companies have the second. They have the most valuable route network and public and business passenger resources. According to the schedule of summer and autumn flight seasons in 2021, the weekly average flight volume of the three airlines in China’s top 15 high-quality routes accounts for more than 60%.
(3) the proportion of international lines is high, and the rebound after the epidemic is the most deterministic. After years of development, the company has a leading market share on mainstream international routes from China to Europe and North America. The company’s international route network is developed, the growth rate of international line capacity continues to maintain at about 10%, and the proportion of international line capacity in the total capacity is high, 41.7% in 2019, significantly higher than 31.6% of China Southern Airlines and 36.5% of China Eastern Airlines. After the epidemic, Air China quickly switched back to the international line capacity. According to the data in April 2022, the proportion of Air China International and regional routes was 6.91%, which was in the repair channel compared with the peak and valley value of 3.34% after the epidemic. The size of Air China’s fleet ranks third in China, with the largest number of wide body aircraft. By 2021, the size of Air China’s fleet is the third in China, but there are 116 wide body aircraft, accounting for 15.65%, which is the highest in China. Considering that Air China’s international transport capacity is mainly carried by wide body aircraft, the large-scale wide body aircraft will play an important role in the recovery of international lines.
(4) tight supply and demand combined with fare market-oriented reform, the aviation industry is expected to rebuild and prosper. On the demand side, the recovery of the aviation industry is affected by the vaccination progress outside China in the short term. In the medium term, the demand brought by the localization of the tourism market continues to grow, and in the long term, the macroeconomic recovery. On the supply side, the industry’s year-on-year growth rate fell to 4.18%, 0.32% and 3.47% from 2019 to 2021. At the end of 2021, the fleet size increased by less than 6% compared with 19 years. During the 14th Five Year Plan period, the speed of capacity expansion of the whole industry slowed down, and the improvement of capacity utilization will also accelerate the convergence of the supply-demand scissors gap, forming a strong support for the income level of civil aviation. Under the background that the trend of fare marketization reform remains unchanged, the vaccine injection rate outside China has increased significantly, and the international travel has gradually recovered, the supply and demand pattern of the industry is expected to be continuously improved.
(5) the oil price is high and the cost side is under pressure. Air China’s passenger kilometer revenue has been relatively stable since 2008. From the available seat kilometer revenue (rasK) of the three major airlines, in 2021, Air China Limited(601111) was 0.56 yuan, China Eastern Airlines was 0.50 yuan, and China Southern Airlines Company Limited(600029) was 0.49 yuan. Air China’s rasK revenue was the highest. On the expense side, the company’s three fee level has remained stable throughout the year. On the cost side, aviation fuel cost is the largest cost item. We believe that the gap between global crude oil supply and demand will exist for a long time, and the oil price will run high for a long time, which will test the company’s operating costs.
Potential catalyst: increasing vaccination rate; Opening of international lines; The introduction of industry fleet slowed down, etc.
Profit forecast and valuation
We predict that the net profit attributable to the parent company from 2022 to 2024 will be -95.77/70.73/14.601 billion yuan, corresponding to EPS of -0.66/0.49/1.01 yuan / share. The company’s resource endowment is high-quality and its performance is relatively flexible, so it is rated as “recommended”.
Risk tips
Market competition intensifies risks; The change of global epidemic situation exceeds the expected risk; Oil prices rose sharply and the RMB exchange rate depreciated sharply.
