Investment Rating - The investment rating for the company is "Buy" (maintained) for both A-shares and H-shares [5][6]. Core Views - The company experienced a significant decline in revenue levels in 2Q24, with a year-on-year revenue increase of 6.4% to RMB 40.189 billion, which is 13.8% higher than the same period in 2019. However, the unit revenue per passenger kilometer decreased by approximately 12% [5][6]. - The overall supply and demand for the company in 1H24 increased by 21.7% and 33.5%, respectively, recovering to 106% of the levels seen in 1H19. The passenger load factor was 83.1%, up 7.3 percentage points year-on-year [5][6]. - The company recorded a net loss attributable to shareholders of RMB 12.28 billion in 1H24, which is an improvement from a net loss of RMB 28.75 billion in 1H23. The net loss in 2Q24 expanded to RMB 19.84 billion, influenced by weak demand and investment losses from a subsidiary [5][6][7]. - The target price for A-shares is set at RMB 6.60 and for H-shares at HKD 4.05, reflecting a valuation premium based on expected improvements in profitability indicators [5][6]. Summary by Sections Financial Performance - In 2Q24, the company's operating revenue was RMB 40.189 billion, with a year-on-year increase of 6.4%. The passenger load factor was 83.2%, up 6.3 percentage points year-on-year, exceeding the same period in 2019 by 0.8 percentage points [5][6]. - The company reported a net loss of RMB 19.84 billion in 2Q24, which is an increase of RMB 10.07 billion compared to the previous year. The total operating cost for 2Q24 was RMB 38.826 billion, up 15.5% year-on-year [6][7]. Profitability Forecast - The net profit estimates for 2024-2026 have been adjusted to RMB 5.19 billion, RMB 38.45 billion, and RMB 79.15 billion, respectively, reflecting a downward revision from previous estimates [5][6][7]. - The expected book value per share (BVPS) for 2024 is RMB 2.06, with price-to-book (PB) ratios of 3.2x for A-shares and 1.8x for H-shares [5][6]. Market Conditions - The company is expected to benefit from increased capacity and strong private demand in the upcoming peak season (3Q24), which may help maintain high profitability levels [6][7]. - The report indicates that the recovery in supply and demand dynamics has not yet fully manifested in the off-peak season, leading to cautious adjustments in profit forecasts [6][7].
南方航空:2Q再次亏损,等待盈利周期到来