Goldman Sachs raised its target price for China Southern Airlines (CSA)(01055) to HK$6.7 from HK$6.6 and upgraded its rating to "buy" from "neutral".
The research house expects the combination of improving demand, controlled capacity, and cost control to support earnings over the coming quarters.
In addition, Goldman said CSA's valuation is near the bottom of its historical range (at 0.8x Last-Twelve-Month P/B). It thinks the earnings downgrade cycle is almost at an end.
Goldman noted that the recently announced major airspace adjustment is a positive for CSA as it facilitates more efficient use of the Beijing-Guangzhou route, a key trunk route for CSA.
It revised its 2019/20/21 adjusted net income estimates by -12%/-11.2%/+6.1%.
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