JUNEYAOAIR(SH:603885) Xin Lang Cai Jing·2025-11-25 12:29Core Viewpoint - The company, as a leading private airline, is expected to exceed performance expectations due to the recovery of aircraft utilization and anticipated price increases in the aviation industry [1] Industry Summary - The aviation supply side is facing hard constraints, crossing a supply-demand inflection point, with ticket price elasticity expected to materialize. The industry is currently in a "tight balance" phase, with passenger load factors reaching new highs and off-season ticket prices turning positive year-on-year. The three major airlines are expected to return to profitability in 2025, with sustained tightness on the supply side anticipated to continue into 2026, driven by calls to avoid internal competition, extended holiday periods, and optimized entry-exit policies. This is expected to lead to steady growth in demand, alongside favorable oil prices and exchange rates, accelerating profit recovery for airlines [2] Company Summary 1. Engine maintenance has negatively impacted aircraft utilization, leading to a significant increase in unit non-fuel costs, which has short-term performance implications. The company's aircraft utilization is expected to recover, driven by improvements in supply-demand dynamics, leading to a steeper upward trajectory in performance over the next three years. In the first half of 2025, the company's aircraft utilization (including grounded aircraft) was 9.8 hours per day, down 0.6 hours year-on-year, with the A320 series utilization at 9.1 hours per day, down 2.2 hours year-on-year. In contrast, the industry-wide aircraft utilization increased by 0.2 hours year-on-year during the same period. The insufficient aircraft utilization led to a year-on-year increase of 11% in unit non-fuel costs for the company in the first three quarters of 2025, temporarily dragging down profitability. The company expects significant improvements in engine issues by the end of 2026, and as aircraft utilization recovers, it will benefit from industry supply-demand improvements, with substantial profit elasticity potential over the next three years [3] 2. The scale operation of wide-body aircraft by the company is expected to elevate profitability. As of the first half of 2025, the company operated 10 B787 wide-body aircraft across 28 international routes (including 7 intercontinental routes), with a daily utilization rate of 14.0 hours, an increase of 2.5 hours compared to the same period in 2019. The profitability of wide-body operations is expected to continue improving. Additionally, the company’s low-cost airline, operating in the Greater Bay Area, has seen continuous optimization of scheduling resources, leading to improved operational efficiency and profitability. In the first half of 2025, this low-cost airline achieved a net profit of approximately 230 million yuan, an increase of 8% year-on-year compared to the first half of 2024, and a staggering 1087% increase compared to the first half of 2019 [4] 3. The company is increasing its dividend and share repurchase efforts, demonstrating confidence in its development. In 2024, the company plans to distribute a dividend of 0.19 yuan per share (including interim dividends), corresponding to a cash dividend ratio of 45%. In 2025, the company announced its third round of share repurchase plans since its listing, intending to repurchase between 250 million to 500 million yuan worth of shares at a price not exceeding 15.80 yuan per share from January 27, 2025, to January 26, 2026. As of September 2025, approximately 400 million yuan had been repurchased at an average price of 12.71 yuan per share. Furthermore, the company has cumulatively canceled 30 million repurchased shares from 2024 to 2025, accounting for 1.4% of the total share capital before cancellation [4] Major Expectations - The company's performance recovery pace is slightly different from the industry, with the worst period already behind. The performance recovery slope and profit elasticity over the next three years are expected to exceed expectations. Market expectations indicate that the maintenance schedule for the engine is slower than anticipated, leading to a slower-than-expected recovery in aircraft utilization, which has impacted profitability. However, it is believed that aircraft utilization will be largely restored by 2026-2027, with plans to introduce 5-6 new aircraft annually from 2027-2028. With favorable fundamentals in supply-demand, oil prices, and exchange rates, the company's effective capacity is expected to grow significantly, and performance is likely to exceed expectations over the next three years [5] Potential Catalysts - Price and volume increases; improved aircraft utilization; declining oil prices; appreciation of the renminbi [6]