Investment Rating - The investment rating for the company is "Outperform" (maintained) [1] Core Insights - The company has shown steady growth in its operations, with a significant increase in both revenue and net profit for the third quarter of 2025, exceeding expectations [6] - The company is focusing on optimizing its regional network and increasing flight volumes to meet the rising demand for personal travel, particularly in the domestic market [6] - The financial outlook for the company is positive, with projected net profits increasing significantly over the next few years, indicating strong growth potential [6] Financial Performance Summary - For Q3 2025, the company achieved a revenue of 2.124 billion yuan, a year-on-year increase of 9.33%, and a net profit of 369 million yuan, up 31.60% year-on-year [6] - For the first three quarters of 2025, total revenue reached 5.734 billion yuan, reflecting an 11.25% year-on-year growth, while net profit was 620 million yuan, a substantial increase of 102.17% year-on-year [6] - The company’s available seat kilometers (ASK) for Q3 2025 reached 4.674 billion, a 15.42% increase year-on-year, and passenger turnover (RPK) was 4.036 billion, up 19.37% year-on-year [6] Future Earnings Forecast - Projected total revenue for 2025 is estimated at 7.978 billion yuan, with a year-on-year growth rate of 19.2% [5] - The forecasted net profit for 2025 is 710 million yuan, representing a significant increase of 165.1% compared to the previous year [5] - The company’s earnings per share (EPS) is expected to rise to 0.56 yuan in 2025, with a projected return on equity (ROE) of 17.5% [5]

Core Viewpoint - The company reported a strong performance in H1 2025, with revenue and net profit showing significant year-on-year growth, indicating resilience in the face of industry challenges [1][2]. Financial Performance - In H1 2025, the company achieved operating revenue of 3.61 billion yuan, a year-on-year increase of 12%, and a net profit attributable to shareholders of 250 million yuan, compared to 26 million yuan in H1 2024 [1]. - The Q2 2025 revenue was 1.84 billion yuan, up 15% year-on-year, with a net profit of 170 million yuan, significantly higher than the 1 million yuan in Q2 2024 [1]. - The company’s passenger kilometer revenue remained stable at 0.52 yuan, benefiting from new capacity procurement contracts and improved demand in the tourism sector [1]. Cost Management - The unit cost continued to decline, down 7.4% year-on-year in H1 2025, aided by increased utilization rates and lower fuel costs [2]. - The unit fuel cost decreased by 10% in Q1 and 23% in Q2 year-on-year, while non-fuel costs showed mixed results [2]. - The company is expanding its coverage of remote routes, which is expected to enhance unit subsidy income due to new regulations increasing subsidies for these routes [2]. Accounts Receivable and Impairment - The company reversed 5 million yuan in impairment losses on accounts receivable, indicating improved cash flow from downstream customers, but also made a provision of about 12 million yuan based on aging analysis [3]. - As of June 30, 2025, the company had approximately 320 million yuan in bad debt provisions, highlighting the need to monitor potential impacts on profitability [3]. Investment Outlook - The company is well-positioned to capitalize on growth in the regional market, supported by government purchasing models that stabilize pricing amid a declining industry environment [3]. - The forecast for net profit attributable to shareholders has been raised to 620 million yuan, 850 million yuan, and 1.13 billion yuan for 2025-2027, respectively, reflecting a positive outlook [3].

Group 1: Market Position and Competition - The company emphasizes that regional aviation and high-speed rail serve different travel needs, with most of its routes not overlapping with high-speed rail lines [1] - Regional aviation primarily caters to lower-density cities, while high-speed rail connects densely populated urban areas [1] - The company has developed a regional aviation hub model centered around cities like Quzhou to enhance its route network [1] Group 2: Industry Growth and Demand - The overall airport throughput growth rate during the 13th Five-Year Plan period is approximately 10%, with regional airport throughput growing at about twice that rate [2] - By 2035, the number of transport airports in China is expected to reach around 450, with most new airports being regional [2] - The demand for air travel in regional cities is projected to continue growing due to rising economic levels and consumer spending [2] Group 3: Financial Performance - In 2024, the company's operating revenue reached CNY 669,560,000, a year-on-year increase of 29.98% [3] - The net profit attributable to shareholders was CNY 26,797,300, reflecting a year-on-year growth of 127.77% [3] Group 4: Operational Efficiency - The average aircraft utilization rate in Q1 2025 was 8 hours, an increase of 0.9 hours year-on-year [3] - The company aims to enhance aircraft utilization to reduce fixed costs associated with leasing and depreciation [4] Group 5: Regulatory Changes and Support - The revised subsidy management measures for regional aviation, effective from January 1, 2024, increase support for economically underdeveloped areas [4] - The new subsidy method shifts from passenger transport volume to actual flight hours, benefiting airlines operating regional routes [4] - In 2024, the proportion of capacity in subsidized routes increased by 4.4 percentage points [4] Group 6: Challenges and Solutions - The company faces challenges in profitability due to the nature of regional aviation, where low passenger volumes hinder route development [5] - Local governments and airports are collaborating with airlines through capacity purchase agreements to stimulate market growth and ensure economic viability [6]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1][10][11] Core Views - The company has shown significant growth in revenue and profit, with a 29.98% year-on-year increase in revenue for 2024 and a 232.31% increase in net profit for Q1 2025 [5][10] - The company is expanding its fleet and opening new routes, which is driving growth in flight volume and improving fleet utilization [6][10] - The company is expected to continue its revenue growth trajectory, with projected revenues of 76.04 billion, 86.64 billion, and 94.42 billion for 2025, 2026, and 2027 respectively, reflecting growth rates of 14%, 14%, and 9% [9][10] Summary by Sections Recent Performance - In 2024, the company achieved an operating income of 6.696 billion, a year-on-year increase of 29.98%, and a net profit of 268 million, compared to a loss of 965 million in the same period of 2023 [5] - For Q1 2025, the company reported an operating income of 1.774 billion, a 9.78% increase year-on-year, and a net profit of 82 million, a 232.31% increase year-on-year [5] Fleet and Operations - The company expanded its fleet to 75 aircraft in 2024 and further to 77 in Q1 2025, with a focus on new route openings and increased flight frequency [6] - The available seat kilometers (ASK) grew by 33.21% in 2024 and 23.73% in Q1 2025, while the revenue passenger kilometers (RPK) increased by 40.72% and 28.08% respectively [6] Revenue and Cost Analysis - In 2024, the company's seat kilometer revenue was 0.433 yuan, a decrease of 2.4%, while other revenue per seat kilometer increased by 83.8% [7] - The operating cost per seat kilometer decreased by 10.4% in 2024, with significant reductions in fuel costs [8] Financial Projections - The company is projected to achieve net profits of 701 million, 1.122 billion, and 1.388 billion for 2025, 2026, and 2027 respectively, with growth rates of 161%, 60%, and 24% [10] - The price-to-earnings (P/E) ratio is expected to decrease from 36.88 in 2024 to 6.86 by 2027, indicating a favorable valuation trend [10][11]