Air China (601111): Maintaining stable revenue growth and effective cost control

Event / News: On March 杭州桑拿网 27, Air China issued its 2018 annual report. In 2018, Air China achieved operating income of 1,367.

74 ppm, an increase of 12 in ten years.

70%, achieving net profit of 73.

36 ppm, an increase of 1 per year.

33%, becoming the only large airline company to maintain performance growth in 2018, in line with the performance expectations we converted in early January.

The domestic supply growth rate is forecast, and the growth trend of revenue is unchanged.

Air China’s ASK growth rate was 10 in 2018.

41%, of which the domestic demand growth rate is only 8.

24%, supply growth was suppressed.

Judging from the number of flights, the growth rate of Air China flights in 2018 was only 6.

89%, domestic flight growth was 6.

At 32%, the restrictive policies stipulated in the “Circular 115” have not seen significant relaxation.

Under the background of slowing supply, Air China has achieved seat-km growth for the second year in a row, and domestic seat-km revenue has increased by more than 2%.

Cost control was productive, and the expense ratio hit a new low.

The price of aviation kerosene in 2018 rose by an astonishing amount. Air China’s average oil price in 2018 in terms of available ton-kilometer (ATK) conversion was about 5,365 yuan / ton, an increase of 28.

46%, but Air China ‘s fuel costs have only increased by 29 when fuel consumption has increased.

24%, cost control efficiency is quite high.

Oil deduction cost growth rate is only 10.

22%, slightly lower than the growth rate of ASK, while reducing costs and increasing efficiency are still underway.

The sales expense ratio and management expense ratio in 2018 were 4 respectively.

6% vs. 3.

4%, the average value is significantly lower than in the past, refined management is more in-depth, and operating leverage has decreased.

Mixed reforms promote efficiency and return on investment returns to normal.

Air China is the second batch of key units participating in the pilot reform of the civil aviation industry. In the fourth quarter of 18, Air China sold 51% of Air China Cargo’s shares.

According to the current mixed industry reform experience, Air China will focus more on the main passenger transportation industry in the future. This will not only effectively reduce Air China’s own asset-liability ratio, but also significantly improve the utilization rate of resources and operating efficiency. The main passenger transportation industry is expected to usher againrapid development.

In 2017, Cathay Pacific’s investment income was significantly affected by Cathay Pacific’s investment income. On the contrary, Cathay Pacific’s performance in 2018 has changed, and Air China’s investment income has returned to its highest level in the past three years.

In the future, Cathay ‘s market share in Hong Kong will continue to increase, and the investment income confirmed by Air China will still be an investment recommendation for growth: From the 2018 Air China results announcement and operating data, short-term incidental costs have a certain impact on performance, but Air ChinaThrough the improvement of supply and demand and cost control, the industry’s only net profit 武汉夜生活网 attributable to mothers is growing.

Supply and demand will continue to improve after further supply decline in the future, long-term fundamentals continue to improve, and the profit margins for oil price exchanges are better, so we adjust the net profit attributable to mothers in 2019-2020 and increase the net profit attributable to mothers in 2021 to97.

8.4 billion, 119.

09 billion, 156.

3.3 billion (originally 90 in 2019.

91 million and 136 in 2020.

1 billion), corresponding to the current expected PE is 15 times, 12 times, 9 times, and upgraded to “Buy” rating.

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