China Express(SZ:002928)2024-08-20 10:08Investment Rating - The report assigns an "Accumulate" rating for Huaxia Airlines, marking the first coverage of the company [1][2]. Core Viewpoints - Huaxia Airlines is focused on regional aviation, with a highly concentrated shareholding structure and a commitment to its core business. The company plans to divest its subsidiary, Huaxia Education, to further concentrate on its main operations [1][19]. - The fleet structure is primarily composed of regional aircraft, with a growth rate consistently exceeding the industry average. As of March 2024, the fleet size reached 72 aircraft, including Bombardier CRJ900, Airbus A320, and COMAC ARJ21 models [1][22]. - The unique business model of "institutional capacity purchase + government subsidies" provides a performance floor for the company. The proportion of institutional capacity purchase revenue in total revenue has gradually decreased and stabilized, while government subsidies are expected to see significant growth due to new policies [1][9]. - The company has a high proportion of independent routes, which limits the impact of rail transport competition. The independent route share has consistently remained around 90%, providing strong pricing power [1][8]. - The new regional subsidy policy, effective from 2024, is expected to significantly increase the amount of subsidies received by the company [1][8]. Financial Summary - The projected net profits for Huaxia Airlines from 2024 to 2026 are estimated at 403 million, 716 million, and 1.191 billion yuan, respectively, with corresponding P/E ratios of 19x, 10x, and 6x [2][3]. - The total revenue for 2024 is forecasted to be 7.092 billion yuan, reflecting a year-on-year growth rate of 37.7% [3]. - The company is expected to achieve a gross profit margin of 7.7% in 2024, improving to 19.2% by 2026 [3]. Key Assumptions - The fleet size is expected to grow to 76, 82, and 88 aircraft from 2024 to 2026, with annual growth rates of 9%, 8%, and 7% respectively [2][8]. - The average aircraft utilization is projected to recover to pre-pandemic levels by the second half of 2025, with daily utilization rates of 7.3, 8.3, and 9.3 hours from 2024 to 2026 [2][8]. - The company anticipates an increase in passenger load factors to 76%, 77%, and 78% over the same period [2][8]. Market Position - Huaxia Airlines is recognized as a leader in the regional aviation market, with a strategic focus on developing a comprehensive network that connects regional routes effectively [1][19]. - The company has established a significant presence in the regional aviation sector, covering 38% of the national regional air points as of the end of 2023 [1][28].