[ET Net News Agency, 4 December 2018] Deutsche Bank lowered its target price for Air
China (00753) to HK$7.63 from HK$8.1 and maintained its "hold" rating.
The research house thinks Air China will continue to benefit from domestic airfare
liberalization, an improved outlook at Cathay Pacific (00293), Beijing capacity
enhancement in 2020 with the moving of some peer airlines to the new airport, and the
disposal of the Air China Cargo JV stake that would allow the airline to solely focus on
the passenger business.
DB is nevertheless still concerned that the reported earnings growth potential could be
capped, with risks of further RMB depreciation and a high jet fuel price.
It cut its FY2018 earnings forecast by 8.1% to factor in RMB depreciation and higher
fuel cost assumptions and raised FY2019-20 earnings estimates by 17.0-17.1% on a lower
operating expense assumption due to the disposal. (KL)