China’s three major airlines have seen H-share prices drop by 7% – 16% this year, while their A-shares have dropped by 12% – 19%, underperforming the 1% gain for the Hang Seng China Enterprises Index, due to the disappointing economic recovery data in April and May, which reversed from the strong recovery in the first quarter, said HSBC Global Research in a note.
The number of local air passengers in mainland China has exceeded pre-pandemic levels, but the recovery of international flights remains slow, affected by the aviation rights bottleneck, visa policies and limited ground capacity of foreign airports, it said. The broker expected the three airlines to recover 43% of their international capacity this year and 82% next year, before a full recovery by 2025.
HSBC Research lowered its EBIT forecast for the three airlines by 12% – 15% this year and lowered its earnings forecast by 41% to 60%. The three airlines will likely turn to a profit of 5.1 billion yuan in the current quarter, benefiting from more passengers and lower fuel costs. For the full year, they are expected to record a total profit of 7 billion yuan.
StockāRatingāTarget Price (HKD)
Air China (00753.HK) āBuyā$9ā$8
China Eastern Airlines (00670.HK) āBuyā$4.2ā$3.7
China Southern Airlines (01055.HK) āBuyā$6.7ā$5.5