EASTERN AIR LOGISTICS(601156)：CROSS-BORDER E-COMMERCE AIRFREIGHT VOLUME CONTINUES TO INCREASE; INTERIM DIVIDEND YIELD ATTRACTIVE-格隆汇

机构：中金公司
研究员：Wenjie ZHANG/Qibin FENG/Xin YANG

　　1H24 results in line with our expectations
　　Eastern Air Logistics announced its 1H24 results: Revenue rose 20% YoY to Rmb11.3bn; gross profit fell 8% YoY to Rmb2.11bn; and net profit attributable to shareholders stayed flat YoY at Rmb1.28bn.
　　In 2Q24, revenue rose 26% YoY to Rmb6.1bn, gross profit grew 14% YoY to Rmb1.28bn, and attributable net profit grew 35% YoY to about Rmb688mn. The firm's 1H24 results are in line with our expectations, and it raised its interim dividend payout ratio to 48.4%, implying an attractive dividend yield of 6%.
　　Trends to watch
　　The firm's airfreight volume and prices were largely stable in 1H24, but the cost of passenger aircraft cargo transportation business rose markedly.
　　1) Cargo volume: In 1H24, the firm’s total turnover of cargo and mail transportation rose 26% YoY to 3.9bn tonne-kilometers, and the cargo turnover of the passenger aircraft cargo transportation business rose 89% YoY to 1.8bn tonne-kilometers, mainly due to YoY recovery in international passenger flights. The turnover volume of all-cargo aircraft fell 2% YoY to about 2.1bn tonne-kilometers, as the firm's all-cargo fleet size fell 18% YoY to 14 aircraft and the daily utilization hours increased 7% YoY to 12.9 hours.
　　2) Freight rates: The TAC Shanghai Air Freight Index rose an average 3% YoY in 1H24 and 23% YoY in 2Q24, thanks to the boom in airfreight for e-commerce and strong airfreight rates despite the off-season.
　　3) Costs: In 1H24, the firm's costs increased mainly due to a 59% YoY rise in the exclusive operating cost of the passenger aircraft cargo transportation business to Rmb2.37bn. GM of the passenger aircraft cargo transportation business fell 5ppt YoY to 5.0%, mainly due to increased expenses for bellyhold capacity of passenger aircraft and lower fee rates.
　　Shifting focus to integrated logistics; cross-border e-commerce business ramping up markedly. Integrated logistics contributed 37% of total gross profit in 1H24, up 12ppt YoY. Specifically, freight volume of the firm's cross-border e-commerce solutions rose 40% YoY to 68,000t in 1H24, accounting for 27% of the cargo and mail transport volume of the　company's all-cargo aircraft; revenue from cross-border e-commerce solutions grew 47% YoY to Rmb2.8bn, accounting for 25% of the company's total revenue. Ground services recorded solid volume and profit. In 1H24, cargo and mail turnover volume of ground services rose 1% YoY to 1.2mnt, with gross profit rising 15% YoY to Rmb490mn, and GM rising 3.6ppt YoY to 40%.
　　The firm declared an interim dividend of Rmb0.389/sh, raising the payout ratio to 48.4%. Assuming the firm maintains the dividend payout ratio for the full year, we estimate the firm's current dividend yield at about 6%, which is attractive.
　　Financials and valuation
　　We cut our 2024 and 2025 earnings forecasts 9% and 12% to Rmb3.01bn and Rmb3.91bn due to rising cargo transportation costs for passenger aircraft. The stock is trading at 8.2x 2024e and 6.3x 2025e P/E. Given our positive outlook on the airfreight industry, we maintain an OUTPERFORM rating. However, given rising uncertainties in future international trade policies, we cut our target price 15% to Rmb22.1, implying 11.7x 2024e and 9.0x 2025e target P/E, offering 43% upside.
　　Risks
　　Disappointing fleet expansion; changes in international trade policies; weaker-than-expected demand for cross-border e-commerce.