CHINA EXPRESS AIRLINES(002928)：3Q22 RESULTS IN LINE AND UNIT YIELD UP;WATCH CAPACITY RECOVERY

3Q22 results in line with our forecast
China Express Airlines announced its 3Q22 results: In 1-3Q22, revenue fell 38% YoY to Rmb2.03bn, and net profit attributable to shareholders equaled -Rmb1.51bn (vs. -Rmb131mn in 1-3Q21); we estimate that attributable net loss excluding the impact of forex was Rmb1.24bn (vs. loss of Rmb146mn in 1-3Q21). In 3Q22, the firm's revenue dropped 18% YoY to Rmb776mn (+19% QoQ) and attributable net loss came in at Rmb558mn (vs. losses of Rmb142mn in 3Q21 and Rmb497mn in 2Q22). We estimate that attributable net loss excluding the impact of forex was Rmb406mn (vs. losses of Rmb131mn in 3Q21 and Rmb371mn in 2Q22).
Capacity declined QoQ in 3Q22, but PLF rose; revenue per RPK rose notably. In 3Q22, the firm's available seat kilometers (ASK) dropped 22% YoY and 5% QoQ. Its revenue passenger kilometers (RPK) fell 28% YoY, but rose 3% QoQ. Its passenger load factor (PLF) came in at 69.0% (-5ppt YoY, +5ppt QoQ). Revenue per RPK increased 13% YoY and 15% QoQ to Rmb0.71 in 3Q22, 12% higher than that in 3Q19. Its revenue per RPK rose notably in 3Q22 as some air routes managed to maintain stable unit yield thanks to the government capacity procurement model.
Unit cost increased due to high oil prices and low capacity utilization rate. The firm's cost per ASK rose 44% YoY and 12% QoQ in 3Q22 due to high oil prices and low capacity utilization rate. In 3Q22, oil prices averaged Rmb8,736/t (+93% YoY and +10% QoQ). The company purchased one Airbus A320 in early 2022. Non-oil unit costs increased as the company was unable to amortize some fixed costs amid the low utilization rate of airplanes.
Trends to watch Capacity recovered with fluctuations. Data from Centre for Aviation (CAPA) shows that the firm's ASK rose 19% YoY in September and 60% YoY in October (due to low base caused by the COVID-19 resurgence and safety inspections in September-October 2021). Its ASK increased 7% MoM in September and 17% MoM in October. We believe ASK growth rate is important as the firm is still building its network. We suggest watching the speed of its capacity ramp-up.
Financials and valuation
We cut our earnings forecasts to -Rmb1.65bn for 2022 from -Rmb831mn, Rmb419mn for 2023 from Rmb478mn, and Rmb921mn for 2024 from Rmb1.01bn to reflect slower-than-expected supply recovery and the impacts of COVID-19 resurgence in major cities. The stock is trading at 26.4x 2023e and 16.7x 2024e P/E. We maintain an OUTPERFORM rating and our target price of Rmb15.2. Our TP implies 17x 2024e P/E, offering 3% upside.
Risks
COVID-19 resurgence; soaring oil prices; safety issues.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。