China Southern Airlines (600029): Provides continuous decline in growth rate and boosts performance

China Southern Airlines (600029): Provides continuous decline in growth rate and boosts performance

Investment Highlights: Events / News: On October 30, China Southern Airlines released the 2019 third quarter report. China Southern Airlines achieved operating income of 1166 in the first three quarters of 2019.

65 ppm, a ten-year increase of 7.

14%, achieving a net profit of 40.

78 ppm, a decrease of 2 per year.

32%, of which 437 achieved operating income in the third quarter.

26 ppm, a five-year increase of 5.

79%, net profit attributable to mothers23.

88 ppm, a ten-year increase of 17.

17%, in line with our October performance expectations.

Supply growth continued to decline, and short-term pressure on demand was obvious.

2019Q3 China Southern 杭州桑拿网 Airlines’ available seat kilometer (ASK) growth rate was 10.

76%, the same growth rate of ASK in the first half of the year, significantly lower than the same period in 201812.

16% growth.

The growth rate of supply has continued to fall, gradually approaching the growth rate of flight time.

During the 19/20 winter and spring season, China Southern Airlines’ growth rate is about 5.

9%, in the short term, it is difficult for China Southern Airlines to accelerate supply.

Although the growth rate of supply in Q3 has decreased, due to the impact of major events, the domestic business demand is significantly colder, and the income growth rate is 5.

79% is also far below the growth rate of ASK, and the overall seat kilometers revenue has dropped significantly.

In the future, the demand growth of the aviation industry will gradually follow the probability of continued macroeconomic changes, but by supplementing the continued tightening of the side and the use of flight resources, the supply of the industry will continue to gradually change, and the supply and demand will continue to improve.Promotion.

Changes in indicators have dragged down costs and improved oil prices.

From 2019, the three major airlines including China Southern Airlines will implement the new leasing regulations. Operating leases will be consolidated into financing leases and included in the balance sheet.

According to the semi-annual report, it is not difficult to find that China Southern Airlines has been more significantly affected by the changes in regulations in the three major airlines, and the cost growth rate has been increased.

In fact, the decline in oil prices is very beneficial, and the fuel cost Q3 has been estimated to have fallen by about 4%. Some changes in hedge regulations have affected the growth rate of operating costs by only 7.

1%, which is basically the same as the growth rate of revenue, and the performance has stopped falling and rebounded in the face of worsening seat income.

The commissioning of Daxing Airport is favorable for the construction of the two bases of China Southern Airlines.

Daxing Airport was officially used in September 2019.

As the airline company with the highest proportion of Daxing Airport at all times, China Southern Airlines will make full use of the advantages of the “new country gate” to realize the favorable situation of efficient operation of the two bases of Beijing-Guangzhou, one south and one north.

The level of economic development in Beijing is high, and the fare level is higher than the national average. A large number of South Expectations will be continuously pushed to the Daxing Airport, which will continue to increase the level of income and increase operating profit margins.

Investment suggestion: From the results and operating data of China Southern Airlines in the third quarter of 2019, changes in leases have an impact on performance. China Southern ‘s operating cost growth rate is closest to the supply growth rate. However, after the contraction of China Southern Airlines ‘supply, the industry ‘s revenues fell sharply.

Supply and demand will continue to improve after further supply decline in the future, long-term fundamentals continue to improve, and the margin of oil prices will improve, with greater profit elasticity and prominent investment value.

Due to the obvious depreciation of the Q3 exchange rate, we adjusted the net profit attributable to mothers for 2019-2021 to 37 after reducing the exchange rate center.

60 billion yuan, 81.

4.5 billion and 97.

09 million yuan (82 before adjustment).

1.6 billion, 100.

01 billion, 127.

66 ppm), corresponding to the current expected PE of 21 times, 10 times, 8 times, but the current PB level is already in the lowest range, the decline probability is relatively, maintaining the “overweight” level.

Risk reminders: Macroeconomic fluctuations, rising oil prices, rapid depreciation of currency exchange rates, and accidents such as air crashes.