Per AI Express, on December 28, 2023, Shenwan Hongyuan released a research report commenting on China Eastern Airlines (600115).
Investment highlights: One of the three major domestic backbone airlines, the pioneer of air super carriers. The company realizes multi-brand operation and comprehensive fleet layout. Leveraging its strong industry position and market acumen, China Eastern Airlines acquired China United Airlines in 2010 to take the lead in the low-cost airline market, and established 123 Airlines during the epidemic, becoming the first domestic airline to deploy full-service, low-cost, and domestic aircraft at the same time. The company is the first domestic airline to operate both ARJ21 and C919 domestic aircraft, and the domestic fleet is developing together.
The location advantage of the main base is significant, and the "four beams and eight pillars" aviation network supports high-quality resources. The company's main base is located in Shanghai, the core aviation hub of the Yangtze River Delta region, and its share in Shanghai has reached more than 40%. Focusing on the construction of the "four beams and eight pillars" domestic route network, China Eastern Airlines' core time resources are stable, and the number of time slots at major airports has steadily increased. The business route companies all occupy a low advantage, and the company's share of popular tourist routes flying to Shanghai also maintains a high position, ensuring the full coverage of the domestic aviation network.
The international aviation network has comprehensive coverage, and the global layout has a clear focus. Based in the international metropolis of Shanghai, China Eastern Airlines has benefited from the plan to build a "globally competitive air transport super carrier", and has a comprehensive layout of international routes around the world, focusing on the capacity of Japan, South Korea, Southeast Asia, Hong Kong, Macao and Taiwan. The company's international revenue level is leading, and the proportion of international capacity is higher than the industry average, and it will fully benefit from the recovery of international routes in the future.
In the short term, it will benefit from the main line of "international + supply" two-wheel drive investment. 1) International: In 2023, the overall international recovery will be about 50%, and visas, international emergencies, labor and other aspects will still objectively affect the resumption of flightsThe recovery of international routes in 2024 will be the main upward marginal change, and overtime on international routes is expected to release excess capacity in the domestic market and support ticket prices. 2) Supply: While the manufacturer's production capacity is still recovering, and the current industry grounding aircraft due to the Pratt & Whitney engine incident will continue to affect domestic supply and reduce domestic available capacity.
We are optimistic about the long-term trend of improving the relationship between supply and demand and improving the profit center after the reshaping of the international line pattern. The profit level of large airlines shows a strong cyclicality, and the company's profitability continues to be under pressure after the epidemic, but it is expected to enter a new round of profit cycle after the recovery period, and once again achieve the growth of the profit center. Due to the first-chain problems faced by manufacturers and the introduction and control of the fleet at the macro level, the tightening of supply growth will continue to be the future trend of the industry. The company has the potential to increase its market share in international routes, and the proportion of China Eastern Airlines' revenue in the international market is expected to increase in the future, accelerating the profit growth of international business.
Investment analysis opinion: 2024-2025 is the performance release period of airlines, under the trend of excess capacity gradually being put into operation to international routes, aircraft utilization rate increasing, and supply and demand in the domestic market tending to be balanced, the company's performance will be greatly improved, and the potential for profit elasticity is expected to be realized. Our **China Eastern Airlines 2023e-2025e net profit attributable to the parent company is 946/167.900 million yuan, 24-25 years corresponding to PE are 9x 5x. Initial coverage, with an "overweight" rating.
Risk warning: demand recovery is less than expected, macroeconomic downturn;The oil sink changes in an unfavorable direction;Risk of aviation safety incidents.
*: Huibo Investment Research).
Disclaimer: The content and data in this article are for reference only and do not constitute investment advice. Do so at your own risk.
Edited by Tsang Kin-fai).
National Business Daily.