1H22 results in line with preannouncement
Beijing Capital International Airport (BCIA) announced 1H22 results: Revenue fell 37% YoY (down 31% HoH) to Rmb1.10bn. The net loss was Rmb1.41bn (vs. net losses of Rmb841mn in 1H21, 1.28bn in 2H21), in line with the firm’s preannouncement.
　　Revenue from aeronautical business fell 50% YoY. Passenger numbers declined 70% YoY to 5.52mn in 2H21, just 11% of that in 1H19 (15% for domestic flights). Airport charges per passenger, and unit aircraft movement charges increased 3% and 33% YoY. The high increase in unit aircraft movement charges is mainly because preferential policies expired on June 30, 2021, and the proportion of international flights with higher charges expanded 10ppt YoY to 20% in 1H22.
　　Revenue from the non-aeronautical business fell 28% YoY, with revenue from franchising down 34% YoY(down 17% HoH) to Rmb351mn. Due to reduced passenger numbers, and rent reduction and exemption, revenue from the advertising and restaurant businesses fell 36% and 51% YoY.
　　Costs stable, but security expenses grew rapidly. Operating costs fell 1% YoY to Rmb2.77bn in 1H22, but rose 1% YoY excluding franchise management fee. Depreciation and amortization, water and electricity costs all fell slightly YoY. Security-related expenses grew 21% YoY, impacted by the pandemic and events such as the Olympic Games.
　　Trends to watch
　　Watch progress in reopening international flights and duty-free store contracts. Shanghai International Airport and Baiyun International Airport have signed supplementary duty-free store agreements with CTG Duty-Free to confirm the collection of rent. We suggest investors watch the negotiations on annual duty-free store contracts.
　　Financials and valuation
　　Given the resurgence of the COVID-19 pandemic, current international flight policies and IATA expectations, we lower our earnings forecast in 2022 from a net loss of Rmb797mn to Rmb2.47bn, lower our 2023 earnings forecast from Rmb1.71bn to Rmb57mn. We introduce our 2024 earnings forecast of Rmb1.70bn. Our assumption is 2022, 2023 and 2024 international passenger numbers will recover to about 5%, 40%, and 85% of the 2019 number, and that existing duty-free store contracts remain in place. The stock is trading at 11.3x 2024e P/E. Maintain OUTPERFORM, and our TP of HK$6.10 (14.0x 2024e P/E), offering 23.5% upside.
　　Risks
　　Resurgence of COVID-19; slower-than-expected reopening of international routes; disappointing supplemental agreement of duty-free contract exemptions