Eastern Air Logistics (SH:601156) Tianfeng Securities·2024-03-12 16:00Investment Rating - The report initiates coverage with a "Buy" rating for the company [3][5]. Core Views - The company is positioned as a leading air logistics service provider in China, leveraging its significant route resources and geographical advantages to build a second growth engine through cross-border e-commerce logistics [1][3]. - The air freight market is experiencing a recovery in capacity supply, but demand remains weak, leading to a significant decline in freight rates. The company’s overall revenue and profit have been under pressure in 2023, although ground service profitability has improved [1][2][3]. Summary by Sections Company Overview - The company, East Air Logistics, was spun off from the air cargo department of China Eastern Airlines and has established a comprehensive air logistics service model. As of Q3 2023, it operates 16 dedicated freighters and has exclusive access to nearly 800 passenger aircraft belly holds [1][3][13]. - The company has a global route network covering 184 countries and regions with 1,088 destinations [1][3]. Air Freight Market - The domestic bellyhold capacity has exceeded that of the same period in 2019, while international bellyhold capacity has recovered to about 50%. The company anticipates a gradual recovery in air freight demand, particularly in the Asia-Pacific region [2][30][31]. - The report highlights structural opportunities in the cross-border e-commerce logistics sector, predicting significant growth in dedicated lines and overseas warehouse markets, with expected market sizes of 964 billion and 3,615 billion yuan by 2025, respectively [2][3]. Route Resources and Geographical Advantages - The company has developed an efficient international air network primarily focused on Europe and North America, with Asia-Pacific as a secondary focus. Despite a decline in air freight rates in 2023, the supply-demand dynamics in Europe and North America may be more favorable [3][28]. - The company has established a stable customer base across various sectors, including fresh produce, cross-border e-commerce, and high-tech industries, with direct customer sales accounting for about one-third of its revenue in the first half of 2022 [3][14]. Financial Performance and Valuation - The company’s revenue for the first three quarters of 2023 was 14.231 billion yuan, a year-on-year decrease of 19.45%, with a net profit of 1.665 billion yuan, down 43.43% year-on-year [16][17]. - The report forecasts the company's net profit for 2023-2025 to be 2.5 billion, 3 billion, and 3.6 billion yuan, respectively, with corresponding P/E ratios of 10x, 8x, and 7x. The target price is set at 20.79 yuan per share based on a 24-year P/E of 11x [3][5][36].