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<Research>JPM Expects Flattish Pricing in CN Aviation Sector, Upgrades CATHAY PAC AIR to Neutral, Favors SPRING AIRLINES/ CEA
Recommend 16 Positive 24 Negative 13 |
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The Hong Kong and China aviation sectors have underperformed the market YTD due to cost pressures, intensified competition and weak pricing power, which pressured profits, according to JPMorgan's research report. The broker also believed that the impact of anti-involution and related regulatory actions is limited, as these initiatives currently struggle to materially improve pricing levels. Therefore, JPMorgan maintained its forecast of flattish prices from 2025 to 2027, reflecting the ongoing dilution of demand by High Speed Rail amid a weak economy. Regarding stocks, the broker was most optimistic about SPRING AIRLINES (601021.SH) and CHINA EAST AIR (00670.HK)(600115.SH), followed by CATHAY PAC AIR (00293.HK) and AIR CHINA (00753.HK)(601111.SH), while CHINA SOUTH AIR (01055.HK)(600029.SH) is the least favored. JPMorgan upgraded CATHAY PAC AIR to Neutral, and added its target price from $8.2 to $9.1on its dividend yield of over 6% and attractive valuation. As for CHINA EAST AIR (00670.HK)'s divestment of its cargo business to focus on passenger transport, and its base in Shanghai like SPRING AIRLINES, both companies are best positioned to benefit from the strong recovery in inland tourism. Therefore, the broker upgraded CHINA EAST AIR's A-shares to Overweight, and lifted its target price from RMB4.1 to RMB5. JPMorgan also kept rating at Overweight on SPRING AIRLINES, and lifted its target price from RMB63 to RMB65. The broker's ratings and target prices for Hong Kong/ Chinese airlines are listed as follows: Stock｜ Rating｜ TP AIR CHINA (00753.HK)｜Underweight｜$3.8→$4.5 AIR CHINA (601111.SH)｜Neutral｜RMB7.1→RMB7.4 CHINA EAST AIR (00670.HK)｜Neutral｜$2.3→$3 CEA (600115.SH)｜Neutral→ Overweight｜ RMB4.1→RMB5 CHINA SOUTH AIR (01055.HK)｜Underweight｜$2.4→$2.9 SOUTHERN AIRLINES (600029.SH)｜Underweight｜RMB4.6→RMB4.8 SPRING AIRLINES (601021.SH)｜Overweight｜RMB63→RMB65 CATHAY PAC AIR (00293.HK)｜Underweight→ Neutral｜$8.2→ $9.1 AASTOCKS Financial News Website: www.aastocks.com |
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