[ET Net News Agency, 23 February 2021] Credit Suisse said domestic air travel has been
depressed amid the pandemic controls, but it sees solid underlying demand shifting to
local travel and traffic stabilising post CNY. Given the COVID-19 situation has become
more contained and the controls would gradually ease, the research house believes domestic
traffic should improve from here and continue to lead the recovery.
Factoring in a stalled recovery amid the recent outbreaks, with a new assumption on
Brent oil price to US$59/US$63 for 2021/22 (from US$50/US$60) for airlines and new
duty-free contract impact for airports, Credit Suisse cut its 2020-22 earnings by 2-83%
for the sector.
Credit Suisse stays positive on airlines for travel recovery and undemanding valuation
at 0.8x P/B (historical average of 1.1x). It revised the target prices for the airlines as
follows:
Name Rating Target price
----------------------------------------------------------------
Air China (00753) Outperform HK$7.7 from HK$6.5
China Eastern Airlines (00670) Outperform HK$4.3 from HK$4.1
China Southern Airlines (01055) Outperform HK$6.0 from HK$5.0
(KL)