[ET Net News Agency, 21 November 2017] HSBC Global Research lifted its target price for
Air China (00753) to HK$8.3 from HK$6.3, and maintained its "hold" rating.
The research house revisited its thesis on Air China following a 26-27% rally in its H/A
shares since September end driven by strong 3Q results. HSBC continues to argue that 2018e
will likely be a challenging year for Chinese airlines as potentially higher fuel prices
will coincide with even further capacity additions.
However Air China stands out among the Big-3 Chinese airlines as it has lowest capacity
expansion during 2017-19 and continues its focus on yield management vs market share.
HSBC believes this strategy will help offset to some extent the challenges of higher
fuel prices and RMB weakening in 2018.
It raised its 2017-19 recurring profit estimates for Air China by 8-26%, driven
primarily by higher passenger yields and higher cargo traffic and yields, offset to some
extent by higher operating expenses (jet fuel prices). (KL)