SA(SH:601021) HTSC·2025-08-29 07:14Investment Rating - The investment rating for the company is "Buy" with a target price of RMB 67.80 [6][7]. Core Views - The company reported a slight improvement in pre-tax profits, with a revenue of RMB 10.304 billion for 1H25, a year-on-year increase of 4.3%, but a net profit attributable to shareholders of RMB 1.169 billion, a decrease of 14.1% [1][4]. - The low-cost airline sector in China still has penetration potential, and the company is expected to maintain growth due to its efficient low-cost operating model [1][5]. Summary by Sections Financial Performance - In 1H25, the company achieved a revenue of RMB 10.304 billion, up 4.3% year-on-year, while the net profit attributable to shareholders was RMB 1.169 billion, down 14.1% [1][4]. - For 2Q25, the revenue was RMB 4.987 billion, an increase of 6.0%, but the net profit decreased by 10.7% to RMB 4.91 billion due to the absence of tax shield benefits [1][3][4]. Capacity and Revenue - The company accelerated capacity deployment in 2Q25, with overall ASK (Available Seat Kilometers) and RPK (Revenue Passenger Kilometers) increasing by 12.1% and 10.9% respectively [2]. - The overall passenger load factor slightly decreased by 1.0 percentage points to 90.4%, with international routes experiencing a more significant decline [2]. Cost and Profitability - The average price of aviation kerosene decreased by 17% year-on-year, leading to a reduction in fuel cost pressure [3]. - Despite a 6.9% increase in operating costs to RMB 4.425 billion, the gross profit margin fell by 0.8 percentage points to 11.3% [3]. Dividend and Buyback - The company announced a mid-term dividend of 36% and a buyback plan of RMB 300-500 million, which may enhance market confidence [4]. Earnings Forecast and Valuation - The forecast for net profit attributable to shareholders for 2025-2027 has been revised down by 13%, 12%, and 10% to RMB 2.374 billion, RMB 3.016 billion, and RMB 3.443 billion respectively [5]. - The target price remains unchanged at a PB (Price to Book) ratio of 3.5x, with a projected BPS (Book Value per Share) of RMB 19.38 [5].