【英文】摩根士丹利报告：中国航空公司和机场：仍处于动荡之中（36页）

China's domestic air traffic has been recovering after the trough in  February. In July 2020, domestic pax volume index has recovered to  74% of last year's level, according to TravelSky. However, international volume index was down 98% YoY. Passenger load factor recovered to 70.3% in June 2020 after a trough of 50% in February,  however, it is still much lower than 83.3% in June 2019.  Our expectation on demand recovery Our China economists expect that growth will return to potential  (~6% YoY) by 4Q20, reaching an above-consensus 2% YoY in 2020  overall. On the air traffic side, we expect: l The recovery on the domestic market to continue, to a positive 5%  YoY growth in 4Q20, while in 2021 grow to 10% above 2019 level; l For international traffic, we expect the YoY drop to slightly  narrow to -90% YoY in 4Q20, from over 95% YoY drop now, and  further recover to ~50% of 2019's level in 2021. Key takeaways from our AlphaWise survey We surveyed 2,667 Chinese residents living in Tier 1-3 cities during  July to August 2020 using online interviews, with 1989 being travelers. The margin of error for findings on the total sample is ±1.5% at  90% confidence level and higher for subgroups.

Chinese airport revenue is highly dependent on international flights  and passenger traffic. Therefore, given the likely >80% YoY decline  of international traffic in full-year 2020, we expect SIAC, BCIA, GBIA  and SACL to see sizable revenue declines in 2020. As fixed costs  (labor costs, rental, depreciation, etc) represent roughly 70% of  overall operating costs for airports, the big-ticket revenue decline  will result in significant negative operating leverage.  In addition, we also see uncertainties in duty free guaranteed rent  negotiations which should happen between airports and China  Tourism Group Duty Free (CTGDF, 601888.SS) in 4Q20. The market  expects that airports can get ~50% of the contracted guaranteed  rent. However, we think it will be difficult for airports to justify such  a claim, because the airport duty free store sales collapse is caused  by the global COVID-19 pandemic which is a force majeure situation  rather than the responsibility of CTGDF.  Long-term growth potential discount by duty free  sector evolution Since 2017, the airport sector has become a proxy for China's duty  free consumption growth, with robust earnings growth and valuation re-rating. However, the travel ban associated with the COVID-19  pandemic has triggered several new developments in the duty free  sector in 1H20 (see Mapping the New Normal: China's Duty-Free  Evolution (8 Jun 2020)). In the future, airport duty free stores face  dilution from other emerging duty free shopping channels, such as  online, Hainan Island, downtown duty free malls, etc. We therefore  expect airports (in particular SIAC and GBIA) to shift from being a  high growth story to investments with stable growth, asset-heavy  business model, high margin and rich cash flow. Potential valuation  de-rating may also happen for airport stocks, from previous 25-30x  P/E to 20-25x range.  The only airport is not hurt by the ongoing duty free evolution is  Meilan Airport (HMIA), which is our top pick within the airport sector.  Please read: Hainan Meilan International Airport: Marching on the  growth track with eased dilution risk (31 Jul 2020).