南方航空（MorganStanley2003q3)（英语版）.pdf16

Summary and Investment Conclusion: Underweight-V
China Southern Airlines (CSA) announced its 3Q03 results
under the Chinese accounting standards on October 29. Net
profit came at a strong Rmb382 million versus a net loss of
Rmb1,165 million for 1H03. No comparative figures were
provided for last year as the company was only recently
listed in the A-share market in August 2003. We believe
the results are more or less in line with the market
consensus.
We are upgrading our earnings estimates and price target
price because the stock’s yield has held up much better than
our expectation. We believe CSA’s management has done a
great job in defending its pricing. Including the effect of the
temporary suspension of the Infrastructure Development
Fund (IFD), we estimate that 3Q03 unit revenue of CSA to
have increased almost 5% when compared with 1H03 and
flat versus 2H02. In addition, our earnings upgrades also
reflect the robust growth of the domestic traffic in recent
months, which have largely exceeded our expectation, as
well as the lower fuel cost forecasts.
Nonetheless, we are maintaining our Underweight-V call on
the stock, due to the following reasons:
• Demanding valuation. While CSA has significantly
underperformed the broader China market indices
(Exhibit 1), the stock has still risen some 20% YTD on
the back of the strong liquidity of the China market.
Currently trading at 1.1 times 2004 P/BV and 8.3 times
our revised 2004 EBTIDA estimate, valuation of CSA
stock remains demanding.
• Traffic momentum may slow. We consider the
current 25% domestic traffic growth for CSA and 30%
for the entire Chinese airline industry as simply
unsustainable. We understand that the strong traffic
momentum remains intact in October. However, we
would expect the growth momentum to slow as we
approach the year-end, especially in light of the central
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