再论吉祥航空的投资价值：乘势而起

Investment Rating - The report assigns a "Buy" rating to Juneyao Airlines (603885 SH) with a target PE valuation of 32x 15x and 11x for 2024 2025 and 2026 respectively [3] Core Views - Juneyao Airlines' profit curve is characterized by a jumpy growth pattern rather than a steady linear one driven by its unique business model and entrepreneurial style [3] - The company is expected to benefit from both industry recovery and its own capital expenditure cycle leading to accelerated profit growth [3] - Juneyao Airlines' dual-brand strategy (full-service and low-cost) differentiates it from peers like Spring Airlines resulting in higher gross margins but also higher operating expenses [7][8] Business Model Analysis - Juneyao Airlines operates a dual-brand strategy with its main brand focusing on full-service operations targeting mid-to-high-end business and leisure travelers while its subsidiary JiuYuan Airlines adopts a low-cost model [7][8] - The company's profit model can be summarized as "high gross margin + low subsidies + high expenses" essentially earning from "resources" compared to Spring Airlines' cost-focused model [7][8] - Historical profitability has been impacted by two major capital expenditure cycles in 2011-2012 and 2017-2019 leading to increased costs and reduced utilization [8][9] Industry Outlook - The aviation sector is expected to see a cyclical recovery driven by rigid supply constraints and demand recovery signals [8] - Industry profitability is projected to improve due to supply-demand dynamics and cost reductions (fuel and FX) [8] - Historical data shows that aviation stocks have outperformed during bull markets with significant absolute returns in past cycles [8][115] Company-Specific Advantages - Juneyao Airlines benefits from its positioning in first and second-tier cities with competitive revenue advantages [9] - The company's private ownership structure allows for greater efficiency and flexibility [9] - Expansion into long-haul international routes and improved utilization of wide-body aircraft (B787) provide additional growth potential [9] - Capital expenditure has peaked leading to reduced financial burdens and improved cash flow [9] Financial Projections - The report forecasts Juneyao Airlines' net profit attributable to shareholders to reach RMB 1 03 billion RMB 2 2 billion and RMB 2 9 billion in 2024 2025 and 2026 respectively [3] - Corresponding PE valuations are projected at 32x 15x and 11x for the same periods [3] Historical Performance - Juneyao Airlines has historically underperformed Spring Airlines in terms of profitability and valuation with a 30% average PE discount during 2017-2019 [7] - The company's ROE averaged 22 3% from 2011-2019 ranking second among major Chinese airlines behind Spring Airlines [44] - Profitability has been volatile due to capital expenditure cycles with significant impacts from aircraft acquisitions and investments in China Eastern Airlines [8][9]