Juneyao Airlines (603885): High-value strategy in the early days of 787 network cultivation aims at long-term
Guide to this report: When the industry is in a downturn, high-quality networks demonstrate pricing power and a more complete bear market plus leverage.
It is expected to become a leveraged breed in the next round of aviation bull market.
Investment Highlights: Maintain “Overweight” rating.
The high-quality network contains the ability to continue to make profit, and the bear market and leverage increase the flexibility of the next bull market.
The 787 initial operating pressure of fluctuating demand has delayed the upward rhythm of profits and has not changed the long-term value.
Revise down the 2019-20 net profit forecast to 1.3 / 1.7 billion (18/24 forecast in October 2018).
Maintain target price of 18.
18 yuan, equivalent to 20 times PE in 2020.
High-quality moment network, showing the pricing power against the trend.
In the first half of the year, net profit fell by 6% year-on-year; excluding the impact of the sale of Huarui Leasing, net profit fell slightly by 1%.
In the second quarter, the deducted non-profit profit turned positive in ten years, better than market expectations.
The company’s leaders have a deep understanding of the regulatory environment and the value of the moment in China’s civil aviation industry. For more than ten years, they have focused on the high-quality trunk market and created a high-quality moment network.
Passenger-kilometer revenue has increased since the second half of 2017, and has increased significantly in 2018. It will continue to rise against the trend in the first half of 2019.
In the downward cycle of demand, the outstanding pricing power of high-quality networks continues to be demonstrated.
The 787 network’s initial growth has weighed on performance and its long-term prospects are better than expected.
There are currently 5 787s and 10 in 2020.
In the initial period, it was completely internally operated, and the low turnover caused the unit cost to be high. Although the quality of the main line was configured, it still dragged down the overall profitability.
Established along the intercontinental line, the turnover will be significantly improved, and the fleet will gradually become larger, and the unit cost will tend to be optimal.
The company is rooted in a high-quality base and is subject to international air navigation rights this year.
The rate of improvement in future earnings will eventually make progress.
Strategically increase leverage at the bottom of the cycle.
In early September, China Eastern Airlines completed its cross-shareholding.
China Eastern Airlines holds 15% of Jixiang’s auspicious shares, and Junyao holds 10% of its shareholders’ aviation. Among them, Jixiang invested nearly 3 杭州桑拿 billion shareholders of Hangzhou4.
Current demand fluctuates, exchange rate depreciation and management mechanisms mask China Eastern’s long-term potential. Auspicious premiums are set to increase at the bottom of the cycle.
Business collaboration will deepen and will show flexibility in the uplink cycle.
Mobility right matching at all times, economic fluctuations, oil price exchange rates, and security accident risks.