China Aviation Oil - Lim & Tan Securities 2024-03-22: Air Travel Rebound

• China Aviation Oil (SGX:G92) remains a beneficiary of rising international air traffic and jet fuel demand in China. The Civil Aviation Administration of China (CAAC) has estimated China’s international air travel market to hit 80% of pre-COVID levels by the end of 2024, up from ~65% in Dec’23.
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FY23 earnings above expectations

• China Aviation Oil’s FY23 net profit rose 75.5% y-o-y to US$58.9mln, above expectations at 117% of our forecast. While revenue declined 12.4% to US$14.4bln from lower oil prices and trading volume, gross profit rose 43% to US$50.6mln on the back of higher gains from jet fuel supply.
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Strong recovery in jet fuel supply and trading volume.

• Total supply and trading volume in FY23 remained relatively flat at 20.03 million mt (-1% y-o-y), mainly attributed to lower trading volume for fuel oil and crude oil. In comparison, jet fuel volume rose 24% y-o-y to 9.85 million mt for FY23, in part due to a 63% rise in jet fuel volumes for the second half of 2023 as post-pandemic demand for air travel continued its recovery.
• China has started to ramp up efforts, extending visa-free policy to several countries and also collaborated with various industry players to increase the accessibility and allure of inbound travel. It is projected that the number of weekly international passenger flights will rise to 6,000 by the end of 2024, compared to fewer than 500 flights per week at the beginning of 2023.

SPIA – a key earnings contributor.

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Chan En Jie Lim & Tan Securities Research | https://www.limtan.com.sg/ 2024-03-22 SGinvestors.io

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