Category: Money tips Release Date: 2006-09-21
1, 2006 operational data analysis: the company in 2006 put considerable caution passenger capacity, annual passenger traffic can be increased by 10.3% in the number of kilometers to reach 97 billion passenger kilometers; the completion of 69.6 billion passenger kilometers charge, an increase of 12.3%, of which domestic, regional and international routes rose by 12.9%, -0.5% and 11.2%; domestic routes are basically normal, traffic growth of about 15% lower than the industry-wide growth rate; regional airline Dragonair, Cathay Pacific and Air China will join forces under the impact of an increase of stagnation, but little overall impact on the China Southern Airlines; international routes growth is basically a considerable growth with the industry as a whole. 2006 China Southern's domestic, regional and international routes respectively, of total passenger turnover ratio of passenger turnover of 84%, 2% and 14%, domestic routes, passenger development remains an absolute priority.
Load factor in 2006 showed a quarterly basis to enhance speed of decline: driven by demand growth in aviation, 2006 load factor increased by 2.3% to 71.7%, broadly in line with early 2006 judgments. Early in 2005 throughout the country's "security first movement" caused by the current industry, a slight slowdown in demand growth, so growth in early 2005 was a relatively low base in 2006 in the first half the company's needs faster growth and load factor to enhance a key reason, from the the second half of 2006 show that, in peak season running speed of capacity, the company load factor to enhance the situation is relatively calm; from sub-quarter indicators, Southern 1-3 quarter 2006 load factor of 70.4%, respectively, 70.9% and 75.1% , respectively, an increase of 5.2%, 2.3% and 1.6%, the growth rate declined quarter by quarter.
Beijing base in the strategic fast-forward: China Southern Beijing base on November 1, 2006 formally put into use, marking China Southern Beijing hub strategy breakthroughs. Beijing Airport Industrial Development Zone, based in Beijing, the first phase of the completion of 20,000 square meters building, basically meet the needs, including administrative offices, operational control, security and marketing needs. Beijing is sending routes 39, including 29 domestic routes, 10 international routes, there were nine routes surrounding areas in Beijing, the market share of 21%, second only to Air China. From January to September, the number of Southern seats in the Beijing market increased by 11.16% year on year investment, capacity growth is basically on the Southern growth rate of the overall capacity to run very, is still in the pioneering stage of operation, flight increased by 6.23%, passenger traffic increased by 16.64 %, load factor increased by 5%, according to investigations and studies, the average fare was increased by 5 cents. Overall, the Beijing market tends to open up the sound development, the Beijing hub strategy shape, is expected to start from the 2007 China Southern Airlines will increase capacity to run the Beijing market, the new international routes will be increased, whether the Southern hub for the smooth functioning of Beijing will be the impact of corporate profits and investment prospects.
2, the financial indicators of review: Due to the low percentage of cargo operations, passenger traffic is the focus of attention; according to China Southern Airlines 10% -12% in recent years, the passenger capacity allocation scheme is expected to steadily increase the overall load factor will still continue. From the flat yield situation, with the 2006 level of fuel surcharges continued to raise, China Southern Airlines unit of the same passenger kilometers earnings continues to rise, 1-3-quarter revenue passenger kilometers, respectively, 0.557 yuan, 0.631 yuan and 0.639 yuan, up by grew by -0.2%, 5.7% and 7.1%, without considering fuel surcharge levied factors, China Southern Airlines passenger kilometers in 2006 1-3 quarter earnings will be 0.509,0.581 and 0.588 yuan respectively, year on year growth of -8.8%, respectively, -- 2.6% and 1.3%; can be seen that the peak season in the aviation, aerospace companies can not only reduce the fare discounts, and extra fuel cost of additional benefits, reflecting the overall aviation needs of the consumer market boom and the capacity of high-fare airline .
3, performance and investment analysis:
2007 international passenger capacity to accelerate delivery: According to the investigations and studies, by the end of 2006 the company is expected number of aircraft 298, in 2007 will introduce the aircraft 41, exit 10, the end of 2007 is expected to reach 329, the company plans in 2007 growth in passenger capacity 10% -12% or so. We forecast that in 2007 China Southern Airlines domestic flight passengers would be released at around 11.5%, 10.6% higher than 2006 levels, will speed up the delivery capacity on international routes, the main launch base of the amount will come from Beijing (and possibly new Beijing - Seoul, Tokyo and Europe and the United States route, which corresponds to the introduction of two A330 long-range aircraft), to meet the 2008 Beijing Olympic Games, is expected to invest close to passenger traffic on international routes 16%, while regional routes, the capacity will be little or no growth; integrated forecasting, China Southern Airlines in 2007 run to the passenger capacity 11.9%.
Load factor improved slightly in 2007: industry needs to maintain a good growth in 2007, the CAAC predicted passenger traffic in 2007 increased about 15%, taking into account China Southern Airlines domestic flights in the last two years growth below the industry average, we expect China Southern 07 passenger turnover on domestic routes increased 13.5%, slightly higher than the delivery capacity growth; as the new opening of international routes are still in the market development stage, because of careful considerations, forecasting China Southern Airlines passenger traffic on international routes in 2007 turnover increased by 15%, lower than the capacity run growth rate of 16% level; regional airline capacity and traffic level of basic maintenance in 2006. Overall judgments, we predicted that China Southern Airlines in 2007 consolidated load factor reached 72.7%, compared with 2006 growth of 1.4% growth rate lower than the 2006 level of 2.3%.
2007 CAO will average a slight decline: After two domestic fuel prices early in 2007 total 270 yuan / ton adjustment, the current aviation fuel price of 6070 yuan / ton, is expected later will still have a downward adjustment of expectations in the range of current 300 yuan / ton, if so, China Southern Airlines in China Aviation Oil in 2007 will be close to 2006 average 5885 yuan / ton annual average; As the international aviation fuel prices fell sharply in 2007 will be lower than average outside the CAO in 2006 level. Overall, the 2007 average price of China Southern CAO levels may be lower than in 2006.
Revenue passenger kilometers will be forced to maintain stability: if fuel prices continued to fall in the territory of 300 yuan / ton, fuel surcharges on domestic routes will be followed by a drop of 25% or about 20 yuan a single trips, so, in 2007 the level of the domestic fuel surcharge will be in 2006 basically the same; taking into account the growth in demand and load factors continued to rise, the overall revenue passenger kilometers fell sharply unlikely. Running out of capacity continued to fare in the off-season to bring a larger negative impact on the prudential considerations, we assume that 07 years, the company's performance in line with revenue passenger kilometers in 2006 was flat, reaching 0.585 yuan; fails to consider consolidation in 2005 years the non-normal factors, we are China Southern Airlines domestic flights in 2007 revenue passenger kilometers in the last five years, the basic assumption that low. Overall, despite the fuel surcharge in the 2006 levy, China Southern Airlines domestic flight passenger kilometers level of return is not significantly improved the level of domestic fares are still involved in the Northern and Xinjiang Airlines into the negative impact, therefore, in addition to oil prices, we China Southern fare levels that will be the main factor affecting their profits, especially in the winter and spring off-season period; This is also our concern about the quarterly report of the main factors.
Labor costs will rise, while the other control the level of unit costs will be a slight decline: As the industry profits in recent years, continued to deteriorate, staff wages and benefits grew by less than the level of growth of per capita income of society is expected to start in 2007 from the company personnel wages and insurance benefits and other expenses will likely continue to rise, in the projection unit, respectively, to increase 07-08 hours a year in personnel costs of 8% and 8%, the corresponding labor costs rose 23% and 23%. From the 2006 read operations, in addition to the cost of oil outside the China Southern Airlines to strengthen the control of management, the relatively moderate increase in operating costs is expected in 2007 to continue to improve operational management capacity, unit costs will be controlled up slightly.
Performance and investment analysis: In accordance with the above assumptions, earnings per share is expected to 06-08 years, China Southern, respectively to 0.01 yuan, 0.25 yuan and 0.59 yuan, current price of 5.8 yuan, corresponding to PE were 829 times, 23 times and 10 times; in view of the oil prices rebound back to 65 U.S. dollars / barrel and above are less likely to mean that in 2007 the possibility of lower oil prices continue to rise, industry profitability will be significantly restored in 2007, price-earnings ratio will be able to be accepted by the market price, given the Unit 3 is expected to send 10 to change to give the target price 5.5-7 million, corresponding to 2007 at 17-22 times PE (diluted), corresponding to 2008 PE at 10-12 times; if oil prices remain at 65 U.S. dollars / ton high following the level of the performance increased sharply in 2008 will be entirely possible to maintain the "Recommended-A" investment rating, the proposed group-buying auction.
