Investment Rating - The investment rating for the company is "Buy" [2] Core Views - The company is expected to achieve profitability in 2025, being the first among major airlines to turn a profit in Q2 2025. The overall demand fluctuations do not alter the long-term growth logic of the aviation industry, and an optimistic upward trend in profitability is anticipated over the next two years [3][11] - The company has maintained a target price of 13.52 CNY for 2027, based on a projected PE ratio of 16 times [11] Financial Summary - Total revenue is projected to grow from 141.1 billion CNY in 2023 to 204.739 billion CNY by 2027, reflecting a compound annual growth rate (CAGR) of approximately 10.3% [5][12] - The net profit attributable to the parent company is expected to shift from a loss of 1.046 billion CNY in 2023 to a profit of 15.07 billion CNY in 2027, indicating a significant recovery and growth trajectory [5][12] - Earnings per share (EPS) is forecasted to improve from -0.06 CNY in 2023 to 0.86 CNY in 2027 [5][12] - The return on equity (ROE) is projected to rise from -2.8% in 2023 to 22.6% in 2027, showcasing a strong recovery in profitability [5][12] Strategic Developments - The company is set to maintain its controlling stake in Shenzhen Airlines, which is undergoing a capital increase of 16 billion CNY. This move is expected to alleviate debt burdens and enhance profitability [11] - The company’s network and customer quality are continuously improving, positioning it as a leading player in the aviation sector [11] Market Position - The company has a total market capitalization of 135.4 billion CNY, with a current stock price of 7.76 CNY [6][12] - The company’s stock has shown resilience, with a 52-week price range of 6.85 to 8.89 CNY [6]

Core Viewpoint - The Chinese aviation industry is expected to enter a "super cycle" with a significant upward trend in profitability by 2026, driven by improved supply-demand dynamics and market conditions [1][2]. Group 1: Long-term Logic of Aviation - The Chinese aviation industry has established a long-term growth logic, with two key conditions for ticket price increases achieved during the 14th Five-Year Plan: market-oriented pricing and high passenger load factors that can effectively transmit to ticket prices [1]. - The supply side has entered a low-growth era, with airlines rationalizing capital expenditure due to low expected returns on new aircraft, leading to a stable fleet planning [1]. - On the demand side, aviation consumption remains in a low-frequency and low-penetration stage, with the demographic dividend for air travel still intact, supporting a steady long-term growth trend [1]. Group 2: Q3 Performance Insights - Despite a temporary weakening in business travel demand during the summer peak season, airlines are still expected to report profits higher than Q3 2019, aided by reduced fuel costs and a recovery in demand post-September [2]. - The initial recovery in business travel demand in April-May was followed by a dip in July-August, but profitability is projected to increase year-on-year due to favorable pricing dynamics [2]. - The expectation of a strong recovery in business travel demand in September, driven by major events, suggests that airlines may achieve record-high demand levels for this period [2]. Group 3: Q4 Outlook - The upcoming Golden Week is anticipated to drive strong travel demand, with airlines optimistic about pre-sale volumes and pricing [3]. - Monitoring the recovery of business travel demand post-October meetings is crucial, as sustained recovery could lead to a significant increase in airline profitability by 2026 [3]. - The focus on reducing internal competition among state-owned airlines is expected to support profitability improvements and a reduction in losses during the off-peak season [3]. Group 4: Investment Recommendations - Companies are advised to strategically invest in the aviation sector, emphasizing high-quality airline networks, as the long-term logic of the "super cycle" is expected to provide dual opportunities for performance and valuation [3].

Core Viewpoint - The Chinese aviation industry is entering a "super cycle" due to the recovery of supply and demand, with passenger load factors exceeding 2019 levels and expected to continue improving [1][2] Group 1: Market Dynamics - The market for airline ticket prices is becoming more liberalized, allowing for better transmission of high load factors to ticket prices [2] - The growth rate of airline fleets is slowing, reducing the negative impact of increased investment in third and fourth-tier cities on ticket prices [2] - The demand for air travel in China is still in its early stages, with low frequency and penetration, indicating a long-term growth trend [2] Group 2: Seasonal Performance - In Q3, despite a temporary decline in business and commercial demand, profitability is still expected to exceed that of Q3 2019 [3][4] - The recovery of business demand in September is anticipated to set a historical high for the month, with domestic ticket prices turning positive year-on-year [4] Group 3: Future Outlook - The upcoming National Day and Mid-Autumn Festival are expected to drive strong travel demand, with airlines optimistic about pre-sale volumes and prices [5] - Continuous monitoring of business demand recovery post-October meetings is crucial, as sustained recovery could significantly elevate airline profitability by 2026 [5] - The Chinese aviation sector is expected to maintain strict control over flight schedules, which will help airlines reduce losses and improve profitability in the medium term [5] Group 4: Investment Recommendations - The long-term logic of the aviation "super cycle" suggests significant potential for performance and valuation growth, recommending strategic investment in high-quality airline networks [6] - Preferred stocks include China National Aviation (601111.SH), Juneyao Airlines (603885.SH), China Southern Airlines (600029.SH), China Eastern Airlines (600115.SH), and Spring Airlines (601021.SH) [6]

Group 1: Mechanical Industry - The mechanical industry report highlights that the US CPI increased by 2.9% year-on-year in August, with a core CPI rise of 3.1% and non-farm employment adding 22,000 jobs [1][4] - The report suggests focusing on export-oriented consumer companies with global manufacturing layouts, brand output capabilities, and channel integration advantages, especially those with diversified capacity and stable customer loyalty [3][16] - The report notes a slight depreciation of the US dollar against the RMB and a slight appreciation of the euro against the RMB, with major shipping routes experiencing a year-on-year increase in freight rates [1][5] Group 2: Aviation Industry - The aviation industry is expected to enter a "super cycle" with high passenger load factors and improving supply-demand dynamics, potentially leading to a significant increase in airline profitability by 2026 [2][8][25] - The report indicates that the Chinese aviation market has achieved market-driven pricing and high load factors, which are essential for price transmission [8][25] - The report anticipates that if business travel demand continues to recover, airlines' profitability will significantly increase, marking a long-term positive trend for the industry [8][25][27] Group 3: Fixed Income Research - The report discusses the issuance of local government bonds in various provinces, totaling 188.52 billion RMB, with a slight narrowing of the bond issuance spread [2][14] - It highlights the impact of the Federal Reserve's interest rate cuts on global policy cycles and the need to monitor liquidity changes and structural opportunities in the bond market [1][11] - The report emphasizes the importance of adjusting investment strategies in response to the evolving interest rate landscape and liquidity conditions [11][13]

Investment Rating - The report assigns an "Overweight" rating for the aviation industry [5]. Core Insights - The Chinese aviation industry is expected to enter a "super cycle," with high passenger load factors and improving supply-demand dynamics. If business travel demand proves sustainable, a significant upward shift in profitability is anticipated by 2026, indicating dual potential for performance and valuation [3][4]. Summary by Sections Supply Side - The Chinese aviation industry has entered a low growth phase in supply, with constraints in airspace slots becoming more pronounced. Airlines are expected to maintain a conservative capital expenditure approach due to low expected returns on new aircraft investments. The "anti-involution" trend is likely to support a low growth trajectory for fleet planning during the 14th Five-Year Plan [4][5]. Demand Side - Aviation consumption in China is still in its early stages, characterized by low frequency and penetration. The demographic dividend from the aviation population has not yet peaked, suggesting a stable long-term growth trend despite short-term demand fluctuations. The summer peak season saw business travel unexpectedly weaken, but profitability is still projected to exceed that of 2019 [4][10]. Q3 and Q4 Outlook - For Q3, despite the unexpected weakness in business travel, profitability is expected to remain above 2019 levels, driven by a recovery in demand post-September events. The report anticipates a record high in business travel demand in September, with domestic ticket prices turning positive year-on-year [4][31]. - In Q4, the report highlights the importance of observing the sustainability of business travel recovery, especially after significant events in October. The optimistic outlook for the National Day holiday suggests strong travel demand, with airlines expected to manage pricing effectively [4][5]. Recommendations - The report recommends an "Overweight" position in the aviation sector, particularly favoring airlines with high-quality networks such as Air China, Juneyao Airlines, China Southern Airlines, China Eastern Airlines, and Spring Airlines. The anticipated "super cycle" in aviation is expected to provide significant performance and valuation opportunities in the coming years [4][34].

Summary of China National Aviation's Conference Call Industry Overview - The Chinese aviation industry is entering a super cycle, with a significant increase in profitability and valuation potential for investors, suggesting a strategic early investment approach [2][4][24] - Long-term supply and demand dynamics are favorable, with supply constrained by airspace bottlenecks and a declining growth rate of aircraft, while demand continues to grow due to increased consumption penetration and demographic advantages [2][8] Key Points on China National Aviation (Air China) - Air China is recommended as a top pick due to its advantageous position in the trunk market, with significant potential for performance and valuation improvement [2][5] - The airline benefits from the dual airport operation strategy in Beijing, gaining incremental time resources that enhance its network and customer structure, thus improving long-term profitability [2][19] - Air China is expected to significantly enhance its profit increment through international hub development and business improvements, especially with regulatory scrutiny on subsidies for non-international hub airports [2][21] Market Dynamics - The market's ticket pricing has become more market-driven over the past five years, which is a core logic of the aviation super cycle, leading to an upward shift in long-term ticket pricing and trunk profitability [12][13] - The recovery of supply and demand is anticipated to reach pre-pandemic levels, with the industry expected to show improved profitability as ticket pricing becomes fully market-oriented [22] Strategic Recommendations - Investors are advised to consider opportunities in the fourth quarter, particularly in the off-peak season, as Air China's core business profitability and valuation potential are expected to be more favorable in the long term [3][23] - The airline's strategic advantages, including its high-quality network and service, are crucial for achieving higher profitability in the coming years [14][15] Long-term Investment Logic - The long-term investment value of Air China is supported by the super cycle logic of the aviation industry, which includes the gradual recovery of supply and demand to pre-pandemic levels and the upward shift in industry profitability due to market-driven pricing [24][25] - Air China's strategic opportunities in the dual airport operation in Beijing and the potential for international line profitability improvement position it as a compelling investment opportunity [24][25] Additional Insights - The airline industry is characterized by significant differences in profitability, primarily driven by takeoff and landing slots and airport locations, which are critical assets often overlooked [15][16] - The dual airport strategy in Beijing enhances Air China's market share in business travel, optimizing its long-term investment value and profitability [17][19] This summary encapsulates the key insights and strategic recommendations regarding Air China and the broader aviation industry, highlighting the potential for significant investment opportunities in the upcoming super cycle.

航空供给低增时代,需求驱动票价上行 -交通运输行业2025年中期投资策略 【航空行业】 2025/ 05 / 30 行业评级： 增持 名：岳鑫 (分析师) 邮箱:yuexin@gtht.com 电话：0755-23976758 证书编号: S0880514030006 姓名:陈亦凡 (研究助理) 邮箱:chenyifan2@gtht.com 电话:0755-23976666 证书编号:S088012407002 投资要点 (行业评级:增持) 国泰海通证券2025中期货股会 01 中国航空"超级周期"长逻辑，万事俱备只欠东风 02 供给： 内因主导外因叠加，供给进入低增时代 需求: 航空人口红利持续，需求继续稳健增长 策略: 预期低位战略布局长逻辑,增持航空 风|险提示： 经济波动风险，油价汇率风险，行业政策风险，增发摊薄风险，安全事故风险等 请参阅附注免责声明 2 03 04 05 【回顾】中国航空消费仍处初级阶段，需求（量× 价）韧性良好目长期空间巨大。2023-24年从压制性需求释放逐步进入新常态 【展望】2025年以来假期亲子游旺盛目展会季公商活跃，需求驱动票价同比转正。航空人口红利尚未结束，需求将继续 ...