China Southern Airlines (600029): Exchange demand double-shake performance exceeded expectations
Investment Highlights Performance Summary: The company achieved operating income of 729 in the first half of 2019.
400 million (+8.
0%), achieving net profit attributable to mother 16.
900 million (-20.
9%); Realize net profit deducted from non-mothers 14.
300 million (-21.
9%).
Among them, the second quarter of 2019 achieved revenue of 353.
100 million (+5.
5%), deducting non-attributed net profit -10.
300 million, -5 earlier than the same period last year.
500 billion has expanded.
In the first half of the year, passenger revenue fell by 1.
6%, deducting non-core net profit of about 1.7 billion yuan.
1) In terms of operation and investment, in the first half of 19, subject to MAX’s minimum grounding (the number of seats accounted for about 4%), a growth rate of 10 was required.
Initial guidance below 1%, RPK growth rate is 10.
4%, completed passenger traffic 0.
6.2 billion person-times (+7.
3%) and a load factor of 82.
65% (down 0.
21pp).
2) In terms of passenger kilometer revenue, aviation demand weakened in the context of the economic downturn, and China Southern Airlines’ passenger revenue was zero in the first half of the year.
478 yuan (-1.
In terms of structure, domestic passenger revenue fell by 1.
6%, international passenger revenue fell 0.
8%.
3) In terms of cost and profit, China Southern’s operating costs in the first half of 2019 totaled 64.4 billion (+7).
2%), of which fuel cost increased by 6.
4% to 206 trillion, the company deducted oil costs 438 trillion (+7.
6%), the apparent unit ASK deduction cost 0.
26 yuan (-2.
3%), consider the lease interest expense 25.
The reduction of 300 million yuan can increase the cost of deducting oil by a comparable unit by about 3.
3%, straightening routes since 18 years, increasing the number of seats, etc., the decline in fuel deduction costs has gradually subsided.
The company’s sales / management / debit exchange financial expense ratios are 4 respectively.
6南京夜网% / 2.
3% / 4.
0%, the total deduction rate for the three fees is 10.9%, rising by 1 every year.
4pp, mainly due to the new lease quotation cost account after the operating lease is added to the table, the financial costs are incomparable, and the compensation of the USD in the leased table is increased to 1 from the sensitivity of China Southern Airlines to the exchange rate of the US dollar.
9.5 billion to 5.
1.7 billion (± 1% per RMB change against the USD).
In the first half of the year, the RMB depreciated against the US dollar by zero.
2%, China Southern recorded a foreign exchange loss of 3.
1 ‰. In the first half of the year, China Southern Airlines deducted non-net profit of approximately 17 ‰ (-22%).
During the downturn of the industry, more attention was paid to the upward flexibility of the company’s operating adjustment.
1) At present, Beijing Airlines accounts for about 20% of China Southern ‘s revenue. The new airport of Beijing is put into operation after National Day. The operation of the Beijing hub ‘s dual-center operation and development of China Southern ‘s international market will further enhance the ceiling of the company ‘s value.After implementing the management ideas of improving quality and efficiency, the company’s route revenue quality is expected to continue to improve.
Earnings forecast and rating: Considering that the rate of increase in freight rates at the beginning of the year was lower than expected, and the friction currency exchange rate in China-US trade negotiations has decreased sharply since the end of July, the overall current exchange loss in the third quarter was more than US $ 1.5 billion. We lower our company’s earnings forecast.
It is estimated that the company’s net profit attributable to its parent in 2019-2021 will be 31, 62, and 67 trillion, corresponding to 19 years of PE at 27X and corresponding PB of 1.
3 times, maintaining the “overweight” level.
Risk warning: the risk of fluctuations in aviation demand, the risk of a significant devaluation of the RMB, and the risk of a significant rise in oil prices.