China Eastern Airlines Co-H

  • Ticker670
K Ajith
  • K Ajith

China Eastern Airlines (670 HK) : Upward revision in air cargo agreeme...

CEA’s new air cargo operating agreement effectively raises its revenue cap by 80% and 54% for 2021 and 2022 respectively. The revenue cap has an embedded cost component, which allows for most of the revenue to flow through to the bottom-line. At current levels, CEA is trading close to 0.81x 2021’s book value and 0.75x 2022’s estimated book value. We believe downside risk is low. Upgrade to BUY. Target price: HK$3.55.

K Ajith
  • K Ajith

China Aviation : May's domestic PLF is the highest ytd; Upgrade CSA to...

Strong pax load factors in April and May hold scope for a better 2Q21. We also upgrade China Southern Airlines to BUY with a target price of HK$5.80 following the conversion of convertible bonds by its parent, CSA Holdings, at an effective 53% premium to book value. Maintain MARKET WEIGHT.

K Ajith
  • K Ajith

China Aviation : Expecting higher losses from a delay in border openin...

A resurgence of COVID-19 infections will delay border openings and thus we expect Chinese airlines’ international traffic to fall by a greater quantum than envisaged earlier. This will lead to renewed pricing pressure on the domestic front, which would then lead to greater losses. We have cut our target prices for all three carriers. We recommend accumulating CEA and CSA at 10% below our latest target prices. Maintain MARKET WEIGHT.

K Ajith
  • K Ajith
600029 China Southern ... (Health Care)
753 AIR CHINA LTD-H (Travel & Leisure) ... (+4)

China Aviation : Weaker-than-expected results; Street yet to price in ...

1Q21 results were worse than expected due to double-digit declines in yields and losses arising from travel restrictions in Jan-Feb 21. Air China fared the worst among the trio with the highest net loss, due in part to losses from Cathay Pacific. Barring at least a 20% recovery in yields from 1Q21, all three carriers are expected to be in the red in 2021. We have also downgraded Air China to SELL from HOLD. Maintain MARKET WEIGHT.

K Ajith
  • K Ajith

China Aviation : 1Q21 Earnings preview: Expecting sequential qoq losse...

We expect all three Chinese carriers to report losses for 1Q21 on 29 Apr 21 due to lower load factors arising from travel restrictions in Jan-Feb 21. CSA is expected to generate the lowest losses due to a higher load factor. A key data point we will be looking out for is the extent of yield deterioration. CSA is our top pick in the sector. Downgrade to MARKET WEIGHT.

K Ajith
  • K Ajith

China Eastern Airlines (670 HK) : Upward revision in air cargo agreeme...

CEA’s new air cargo operating agreement effectively raises its revenue cap by 80% and 54% for 2021 and 2022 respectively. The revenue cap has an embedded cost component, which allows for most of the revenue to flow through to the bottom-line. At current levels, CEA is trading close to 0.81x 2021’s book value and 0.75x 2022’s estimated book value. We believe downside risk is low. Upgrade to BUY. Target price: HK$3.55.

K Ajith
  • K Ajith

China Aviation : May's domestic PLF is the highest ytd; Upgrade CSA to...

Strong pax load factors in April and May hold scope for a better 2Q21. We also upgrade China Southern Airlines to BUY with a target price of HK$5.80 following the conversion of convertible bonds by its parent, CSA Holdings, at an effective 53% premium to book value. Maintain MARKET WEIGHT.

K Ajith
  • K Ajith

China Aviation : Expecting higher losses from a delay in border openin...

A resurgence of COVID-19 infections will delay border openings and thus we expect Chinese airlines’ international traffic to fall by a greater quantum than envisaged earlier. This will lead to renewed pricing pressure on the domestic front, which would then lead to greater losses. We have cut our target prices for all three carriers. We recommend accumulating CEA and CSA at 10% below our latest target prices. Maintain MARKET WEIGHT.

K Ajith
  • K Ajith
600029 China Southern ... (Health Care)
753 AIR CHINA LTD-H (Travel & Leisure) ... (+4)

China Aviation : Weaker-than-expected results; Street yet to price in ...

1Q21 results were worse than expected due to double-digit declines in yields and losses arising from travel restrictions in Jan-Feb 21. Air China fared the worst among the trio with the highest net loss, due in part to losses from Cathay Pacific. Barring at least a 20% recovery in yields from 1Q21, all three carriers are expected to be in the red in 2021. We have also downgraded Air China to SELL from HOLD. Maintain MARKET WEIGHT.

K Ajith
  • K Ajith

China Aviation : 1Q21 Earnings preview: Expecting sequential qoq losse...

We expect all three Chinese carriers to report losses for 1Q21 on 29 Apr 21 due to lower load factors arising from travel restrictions in Jan-Feb 21. CSA is expected to generate the lowest losses due to a higher load factor. A key data point we will be looking out for is the extent of yield deterioration. CSA is our top pick in the sector. Downgrade to MARKET WEIGHT.

K Ajith
  • K Ajith

China Eastern Airlines (670 HK) : Upward revision in air cargo agreeme...

CEA’s new air cargo operating agreement effectively raises its revenue cap by 80% and 54% for 2021 and 2022 respectively. The revenue cap has an embedded cost component, which allows for most of the revenue to flow through to the bottom-line. At current levels, CEA is trading close to 0.81x 2021’s book value and 0.75x 2022’s estimated book value. We believe downside risk is low. Upgrade to BUY. Target price: HK$3.55.

K Ajith
  • K Ajith

China Aviation : May's domestic PLF is the highest ytd; Upgrade CSA to...

Strong pax load factors in April and May hold scope for a better 2Q21. We also upgrade China Southern Airlines to BUY with a target price of HK$5.80 following the conversion of convertible bonds by its parent, CSA Holdings, at an effective 53% premium to book value. Maintain MARKET WEIGHT.

K Ajith
  • K Ajith

China Aviation : Expecting higher losses from a delay in border openin...

A resurgence of COVID-19 infections will delay border openings and thus we expect Chinese airlines’ international traffic to fall by a greater quantum than envisaged earlier. This will lead to renewed pricing pressure on the domestic front, which would then lead to greater losses. We have cut our target prices for all three carriers. We recommend accumulating CEA and CSA at 10% below our latest target prices. Maintain MARKET WEIGHT.

K Ajith
  • K Ajith
600029 China Southern ... (Health Care)
753 AIR CHINA LTD-H (Travel & Leisure) ... (+4)

China Aviation : Weaker-than-expected results; Street yet to price in ...

1Q21 results were worse than expected due to double-digit declines in yields and losses arising from travel restrictions in Jan-Feb 21. Air China fared the worst among the trio with the highest net loss, due in part to losses from Cathay Pacific. Barring at least a 20% recovery in yields from 1Q21, all three carriers are expected to be in the red in 2021. We have also downgraded Air China to SELL from HOLD. Maintain MARKET WEIGHT.

K Ajith
  • K Ajith

China Aviation : 1Q21 Earnings preview: Expecting sequential qoq losse...

We expect all three Chinese carriers to report losses for 1Q21 on 29 Apr 21 due to lower load factors arising from travel restrictions in Jan-Feb 21. CSA is expected to generate the lowest losses due to a higher load factor. A key data point we will be looking out for is the extent of yield deterioration. CSA is our top pick in the sector. Downgrade to MARKET WEIGHT.

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