Guotai Junan Securities·2024-10-03 07:11Investment Rating - The report maintains a "Buy" rating for China National Aviation (601111) [4] Core Views - The aviation demand shows resilience, and supply-demand recovery is expected to continue. The company is projected to reduce losses year-on-year in the first half of 2024, with a high-quality flight network anticipated to demonstrate an upward shift in profit center once supply-demand recovers [2][3]. Summary by Sections Investment Highlights - The report emphasizes the optimization of the high-quality flight network of China National Aviation, indicating that short-term pressures do not diminish its long-term value. The profit center is expected to exceed expectations once supply-demand recovers. The net profit forecasts for 2024 and 2025 have been adjusted down to 8 billion and 61 billion respectively, with a new forecast for 2026 set at 150 billion. The target price has been revised down to 13.52 yuan from 14.53 yuan, based on a 15x PE ratio for 2026 [3][4]. Financial Performance - In the first half of 2024, the company reported a net profit attributable to shareholders of -28 billion yuan, continuing to reduce losses year-on-year. The recovery in profitability is slower than the recovery in turnover due to factors such as pressure from wide-body aircraft and seasonal supply-demand challenges. The company is committed to a stable pricing strategy, although domestic passenger revenue remains nearly 6% lower than in 2019 due to business travel cost controls [3][10]. Market Outlook - The report suggests that the aviation sector has a long-term growth logic, as the Chinese aviation market is still in its early stages of development. The low frequency and low penetration characteristics indicate significant long-term potential. Additionally, international flight increases are expected to help absorb excess capacity, further driving supply-demand recovery [3][10]. Strategic Positioning - Under the "Super Carrier" strategy, the optimization of the flight network is expected to enhance long-term value. The company has acquired high-quality flight slots in key markets, which will support ongoing optimization of passenger sources. Future international flight increases and demand growth are anticipated to further drive supply-demand recovery and cost reductions [3][10].