China Southern Airlines (600029) Interim Review: Operating Low Has Passed and Rebounds Oversold

The company announced the 2019 half-year report.

China Southern Airlines achieved revenue of 729 in the first half of 2019.

4 billion (+7.

97% YOY), after deducting non-return to the mother’s net profit14.

34 billion (-21.

85% YOY), expected ROE2.

69% (-1.

48pct), basic EPS0.

14 yuan (-33.

33% year-on-year).

The load factor decreased by 0 in the first half of the year.

12 averages, with an average decrease of 1 per quarter.

65 units.

In the first half of the year, domestic ASK increased by half a year.

9%, maintaining a rapid growth, but RPK exceeded growth of 8.

8%, the domestic load factor fell slightly to zero in ten years.

12 units.

Among them, the international ASK increased for half a year.

9%, RPK increased by 14 in half a year.

0%, the international load factor is increased by 0 every quarter.

With 84 averages, the international load factor performed better.

Overall passenger-kilometer revenue fell by 1 year-on-year.

65 averages, of which domestic decline 1.

5 pcts, international decline 0.

79.

Since the second quarter, the economy has experienced a rapid decline, foreign exchange losses caused to air passengers have dragged down profits in the second quarter, and jet fuel costs have increased by 6.

4%.

Since May, the price of oil has fluctuated steadily, and capacity has increased by 8 per year in the first half of the year.

9%, jet fuel costs only increased by 6.

4%, jet fuel costs support profit.

Since entering May, the yuan has depreciated rapidly against the US dollar.

As of June 30, 2019, every 1% depreciation of RMB against USD against USD will result in a decrease in the company’s net profit by RMB 5.

1.7 billion.

In the second quarter, the people’s exchange rate against the US dollar depreciated by more than 2%, and the single-quarter exchange loss in the second quarter was 上海夜网论坛 expected to exceed US $ 1 billion.

Become a major factor in reducing decline.

The operating profit in the third quarter was better than that in the same period last year, and the exchange rate was still a drag.

It is expected that in the third quarter, the downward trend of the economy will continue to weigh on public business travelers, and the load factor will gradually decrease1.

With 6 pcts, the gain per seat km exceeds 2 pcts per year.Entering the third quarter, the RMB depreciated against the US dollar accelerated, thereby expanding exchange loss losses.

The estimate of aviation stocks fell to the historical bottom area, and the company’s Hong Kong stocks PB 0.

75x.

It is estimated that the response is extremely pessimistic and there is little room for downwards.

From the perspective of secondary schools, mass aviation travel is still the main trend, and the number of trips per capita is further extended.

As the economy stabilizes, aviation stocks will usher in a cyclical upward trend.

Investment advice: Investment demand stabilizes and rises, investment risks clear, industry boom is expected to pick up, Guangzhou and Beijing’s dual hub network, strengthen cost control, and improve revenue management. It is expected that performance will gradually improve in the next two years.

It is expected that the EPS of China Southern in 19-21 will be 0.

32, 0.

46, 0.

65 yuan, corresponding to the current sustainable PE is 21 respectively.

6, 14.

9, 10.

5 times.

For 2019 PB 1.

2x, given a target price of 9 yuan, corresponding to 19 years of PB1.

6x, maintaining “Highly Recommended-A” rating.

Risk reminder: Oil price rises sharply, RMB depreciates