Earned 4.7% more in 2014

Revenue of BCIA was RMB 7.656 billion, +6.0%yoy. The recorded net profit was RMB 1.39 billion, + 4.7%yoy. The EPS was RMB 0.32, while the EPS of 2013 was RMB 0.31. The Board proposed to distribute the final dividend of RMB 0.0816 per share, together with the interim dividend of RMB 0.0469 per share, the dividend payout ratio reached 40%. The debt structure of the Company was continuously optimized and the total debt ratio dropped from 50.4% to 46%. The operating expenses were RMB 5.171 billion, representing an increase of 6.7% or RMB 0.323 billion, of which the increase was higher than revenues.

Aeronautical business: continuously slow increase in revenues

In 2014, the Company's aircraft movements reached 582,000 sorties, +2.5%yoy. The passenger throughput reached 86.13 million person-times, up 2.9% yoy. The cargo and mail throughput reached 1.85 million tons, basically flat as compared with corresponding period of the previous year. The aeronautical revenues were RMB 4.368 billion, +4.0% yoy.

A slight increase in non-aeronautical business

In 2014, the non-aeronautical revenue of the Company was RMB 3.288 billion, up 8.8% yoy, and the growth was higher than 2013. Among which, the concession revenues were RMB 2.15 billion, + 6.4%. The rental revenues of the Company were RMB 0.944 billion, + 15.8%, mainly due to the increase in the rental price. In addition, the Company reached agreements with certain customers in respect of the usage fee of some facilities for the previous years, and recorded the related revenues in this fiscal year. The car parking service fee of the Company was RMB 0.18 billion, +7.3%, mainly due to the increase in car parking price standard.

Outlook

Look into the future, the company plans to continuously optimize the flow structure and hopes to raise the proportion of the passengers of international flights and the punctuality rate of the flight schedules. As to the freight service, the company also tries to implement the new freight service mode, for example, it signs a strategic cooperative agreement on freight with SF-Express. We believe, with the further development and the popularization of this mode in the coming future, it is expected to be a new business increase point in the future.

Valuation and investment thesis

We adjust the net profit in 2015/2016 to the expected 1.59/1.80 Billion RMB, and correct the target price to 9.23 HKD, corresponding to respectively 7.5 x EBITDA per share in 2015, and give an Accumulate rating. (Closing price as at 10 April 2015)

Earned 4.7% more in 2014

In 2014, the revenue of BCIA was RMB 7.656 billion, representing an increase of 6.0% as compared with the previous year. The recorded net profit was RMB 1.39 billion, representing an increase of 4.7% as compared with the previous year. The EPS was RMB 0.32, while the EPS of the same period last year was RMB 0.31.

The Board proposed to distribute the final dividend of RMB 0.0816 per share, together with the interim dividend of RMB 0.0469 per share, the dividend payout ratio reached 40%. The debt structure of the Company was continuously optimized and the total debt ratio dropped from 50.4% to 46%.

Steady and slight increase in traffic volumes

In 2014, the Company's aircraft movements reached 582,000 sorties, representing an increase of 2.5% as compared with the previous year. The passenger throughput reached 86.13 million person-times, up 2.9% yoy. The cargo and mail throughput reached 1.85 million tons, basically flat as compared with corresponding period of the previous year.

On a closer look, for domestic routes, the relevant aircraft movements and passenger throughput continued to record a modest growth subject to the slow growth of domestic economy and the tight flight slots of BCIA;

While for international routes, the growth of relevant aircraft movements and passenger throughput remained stable due to the gradual increase in demand for air travel of international passengers and the higher percentage of large aircrafts, which were comparable to those in the previous year.

Continuously slow increase in Aeronautical revenues

The aeronautical revenues were RMB 4.368 billion, representing an increase of 4.0% as compared with the previous year. Among which, mainly due to positive impact of the uniform charging policy for domestic airliners operating international routes with effect from April 2013 and a higher percentage of large aircrafts, the revenue from passenger charges was RMB 1.7 billion, representing an increase of 3.6% as compared with the previous year, which was higher than the increase in passenger throughput.

The revenue from aircraft movement fees and related charges was RMB1.58 billion, representing an increase of 5.4% as compared with the previous year which was higher than the increase in aircraft movements.

The revenue from the Airport Fee was RMB 1.1 billion, representing an increase of 2.4% as compared with the previous year, which was slightly lower than the increase of passenger throughput, mainly due to the significant growth in the number of children passengers (Airport Fee is waived for children passengers) resulted from the popularity of the parent-child travel market.

A slight increase in non-aeronautical business

In 2014, the non-aeronautical revenue of the Company was RMB 3.288 billion, up 8.8% yoy, and the growth was higher than 2013. Among which, the concession revenues were RMB 2.15 billion, representing an increase of 6.4%. The rental revenues of the Company were RMB 0.944 billion, representing an increase of 15.8%, mainly due to the increase in the rental price. In addition, the Company reached agreements with certain customers in respect of the usage fee of some facilities for the previous years, and recorded the related revenues in the fiscal year. The car parking service fee of the Company was RMB 0.18 billion, representing an increase of 7.3%, mainly due to the increase in car parking price standard.

The concession revenues from retailing and concession revenues from advertising increased more than others among concession revenues.

The former increased to about RMB 0.94 billion, up 7% yoy, which was benefited from the recovery of the growth in international passenger throughput and the increase in the number of passengers with high purchasing power (the number of passengers in international routes from domestic airlines up 11.6% yoy). The later increased to RMB 0.82 billion, up 6% yoy, due to the addition of certain new media resources and the increase in certain new contractual prices. In addition, other concession revenues were RMB 84.41 million, representing a great increase of 25.2% due to the addition of catering business.

Growth rate of expenses was higher than revenues

The operating expenses were RMB 5.171 billion, representing an increase of 6.7% or RMB 0.323 billion, of which the increase was higher than revenue's.

Among which, the depreciation and amortization expenses were RMB1.454 billion, representing a decrease of 5.5% or RMB 84 million, mainly because the depreciation and amortization period of certain fixed assets ended. But the cost savings from this section was offset by increased repair and maintenance expenses.

The increase in costs was mainly due to the relevant costs generated from the increase in operating time of T3D, including repair and maintenance expenses, the utilities and power expenses, the rental expenses and operating contracted services costs, totally increased by 18.7% or RMB 0.32 billion.

In addition, the aviation safety and security guard costs represented an increase of 7.0% or RMB 32 million, due to the convening of APEC and large meeting and the security upgrade for dealing with safety emergencies.

As a result of the significant appreciation in RMB against USD in 2014, exchange losses on the liabilities denominated in US dollar was about RMB 10 million, and the annual net finance costs represented an increase of 5.3% or RMB 27 million.

The company purchased T3D and the supporting resources from the parent company at the end of October 2014, with the price of RMB 2.24 billion. The transfer transaction had been completed in January 2015 and it is expected that the rent expense, namely RMB 0.13 billion/year will be saved in the coming future. However, the cost of depreciation will increase a little.

Outlook

Look into the future, the company plans to continuously optimize the flow structure and hopes to raise the proportion of the passengers of international flights and the punctuality rate of the flight schedules. As to the freight service, the company also tries to implement the new freight service mode, for example, it signs a strategic cooperative agreement on freight with SF-Express. We believe, with the further development and the popularization of this mode in the coming future, it is expected to be a new increase point in the future.

Valuation

We adjust the net profit in 2015/2016 to the expected 1.59/1.80 Billion RMB, and correct the target price to 9.23 HKD, corresponding to respectively 7.5 x EBITDA per share in 2015, and give an Accumulate rating.

Financials

Click Here for PDF format...