2022 results in line with the preannouncement
　　Beijing Capital International Airport (BCIA) announced its 2022 results: Revenue fell 33% YoY to Rmb2.23bn, and net loss widened to Rmb3.53bn (vs. a net loss of Rmb2.12bn in 2021), in line with the firm's preannouncement (net loss of Rmb3.5-3.6bn). In 2H22, revenue fell 29% YoY and rose 3% HoH to Rmb1.13bn, and its net loss was Rmb2.12bn (vs. Rmb1.28bn in 2H21 and Rmb1.41bn in 1H22). The board suggests no dividend for 2022.
　　Revenue plunged YoY in 2H22 due to COVID-19 resurgence. Specifically, revenue from the aeronautical business fell 44% YoY to Rmb362mn in 2H22. Due to COVID-19 resurgence, the firm's aircraft takeoffs and landings fell 50% YoY in 2H22, and passenger throughput dropped 41%. Revenue from non-aeronautical businesses fell 19% YoY to Rmb768mn in 2H22, narrower than the decline in production, mainly due to relatively small declines in rental and advertising franchise revenue (down 16% and 30% YoY). Retail revenue rose 25% YoY to Rmb42mn in 2H22 as the firm recognized part of franchise revenue under the supplementary duty-free store agreement signed in 2H21.
　　Costs declined slightly in 2H22. Operating costs fell 7% YoY in 2H22. Excluding franchise management fees, operating costs fell 6% YoY. Specifically, maintenance expenses fell 16% YoY as most building repair projects were completed last year. Aviation security-related expenses fell 13%, and utilities and power costs dropped 10% YoY.
　　Trends to watch
　　International traffic recovered steadily; watch DFS agreement. BCIA’s passenger throughput grew about 88.9% YoY in January-February 2023. International passenger volume soared increased 274.1% YoY, 7% of the level in the same period of 2019, thanks to relaxed travel restrictions and increasing international mobility. For the overall industry, we expect international flights to recover to more than 40% and 90% of the 2019 level in 2023 and 2024 and expect 24% of passenger volume from BCIA to be diverted to Beijing Daxing International Airport. The firm has not decided on future duty-free rental collection methods. Given the steady recovery in international travel and the mainstream practices of overseas airports, we think it is not likely for the firm to make major changes in its future contracts.
　　Financials and valuation
　　We maintain our 2023 and 2024 net profit forecasts at Rmb57mn and Rmb1.83bn. The stock is trading at 12.4x 2024e P/E. Maintain OUTPERFORM. We maintain our TP of HK$8.3 (about 18x 2024e P/E), offering 37% upside.
　　Risks
　　Disappointing resumption of international flights; higher-than-expected traffic diversion from Daxing airport; intensifying competition among DFS channels; higher-than-expected growth in connected transaction cost; unexpected capex.