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Air China (601111): Q4 significant growth off-season results exceeded expectations

A brief evaluation of the company’s 2018 revenue of 1,367.

700 million, an increase of 12.

7%, net profit attributable to mother 73.

400 million, an increase of 1.

3%, net of non-attributed net profit 66.

200 million, down 8.

4%; Q4 single-quarter revenue was 338.

900 million, an increase of 19.

5%, net profit attributable to mother 4.

0 billion, -10 in the same period last year.

400 million, Q4 performance exceeded expectations.

Q4 revenue accelerated, and the increase in revenue levels became a highlight of performance. We estimate that the overall passenger revenue of Q4 increased by more than 10%, driving the overall overall passenger revenue to increase by 2%.

9% (domestic 2.

6% / international 5.


We believe that mainly due to Q4’s control of capacity deployment, the overall ASK increased by 7.

7% (domestic 6.

6% / International 9.

0%), and after two full increases in 2018, Q4 took the initiative to adopt a more aggressive price strategy.

The price strategy has improved the company’s demand, and the overall RPK of Q4 increased by 6.

2% (domestic 4.

9% / international 8.

0%), driving down the Q4 load factor to 79.

7%, down by 1.

2pct (domestic-1.

3pct / international 0.

7 pct), but it has a positive effect on the revenue side, the sensitivity of demand is reduced, and the upward elasticity of fares is prominent.

Oil prices rose, exchange losses dragged down performance growth: Q4 aviation kerosene ex-factory price was 5,969 yuan / ton, an increase of 34.

7%, driving Q4 operating costs to increase by 13.


However, the fare increase still significantly increased the company’s gross profit, reaching 8 in the low season in Q4.

4%, compared to only 3 in the same period last year.


Initially, the impact of rising oil prices and foreign exchange losses is obvious. The cost of oil in 2019 is 384.

800 million, an increase of 35.

5%, exchange loss of 23.

800 million, a gain of 29 in the same period last year.
4 billion.
However, the company’s cost control effect is good, and the cost of deducting oil kilometers is reduced by 3 as well.

4%. In addition, as Cathay Pacific turned losses, the company’s investment income increased by 16.

8 billion.

B737MAX8 suspension of airworthiness certification, providing supplementary or exceeding expectations: Civil Aviation Administration proposed to suspend the B737MAX8 temporary airworthiness certification, the replacement of aircraft delivery, or it will affect the change in the next 1 to 2 years, resulting in tighter supply margins in the intermediate industry.

The suspension of stocks and the expected delivery of incremental capacity may bring a supply gap of more than 5%, and the expansion will continue to increase performance.

Investment advice At present, overall aviation demand has improved, transportation capacity has been supplemented, and further reforms and sustainable development are expected. The flexible release of ticketing has momentum.

And it is expected that the oil price and exchange rate will gradually turn to be favorable, and the company’s EPS for 2019-2021 is expected to be 0.



27 yuan, corresponding to 13/10/8 times PE, maintain “Buy” rating.

Risks suggest that the diversion of Daxing Airport exceeded expectations, changes in oil prices and exchange rates ran through, and the problem of capacity transfer in the medium term was alleviated.