上海机场(600009)

SIAC's passenger traffic growth improved to 4.2% YoY in Sep-17, f rom 1 .2% i nAu g- 1 7 . Speci f i ca l l y, i n tern a ti on a l tra f f i c grew 6. 7 % YoY, u p f rom 4.4% i n Au g- 1 7 ,vs. domesti c growth a t 3.5% YoY (- 1 .8% i n Au g- 1 7 ). I n 9M1 7 , overa l l pa x growthn orma l i zed to 5.3% YoY, f rom 1 0 .0% i n 9M1 6 (3. 1 % YoY i n 3Q1 7 vs. 9. 1 % i n 3Q1 6).

Aircraft movement growth recovered to 3.6% YoY in Sep-17, f ol l owi n g 0 .0% i nAu g- 1 7 , wi th h i gh er a vera ge da i l y l a n di n gs of 1 ,385 (vs. 1 ,366 i n Au g- 1 7 ). B etterperf orma n ce wa s f ou n d on domesti c (+1 .5% vs. - 5. 1 %) a n d regi on a l (- 1 . 7 % vs. -3.8%) rou tes, wh i l e i n tern a ti on a l momen tum rema i n ed stron g (+7 .4% vs. +7 .5%).I n 9M1 7 , a ggrega te a i rcra f t tra f f i c grew 3.3% YoY, sl ower th a n 7 .5% i n 9M1 6 (2.2%YoY i n 3Q1 7 vs. 6.4% i n 3Q1 6).

Cargo/mail volume growth accelerated to 13.6% in Sep-17, vs. 1 2. 1 % i n Au g- 1 7 .Wh i l e i n tern a ti on a l a n d regi on a l growth improved to 1 8. 1 %/7 .0% YoY, vs.1 6. 7 %/3.6% i n Au g- 1 7 , decl i n e i n domesti c rou tes n a rrowed (- 5.3% vs. - 6.6%). YTD,tota l vol ume h a s i n crea sed 1 3.3% YoY, si gn i f i ca n tl y f a ster th a n 2.6% i n 9M1 6(1 2.8% YoY i n 3Q1 7 vs. 4. 7 % i n 3Q1 6).

CAAC penalty update: Accordi n g to CAAC of f i ci a l n ews on September 26, 20 1 7 ,a pprova l of tempora ry f l i gh ts, ch a rtered f l i gh ts a n d n ew rou te a ppl i ca ti on s bySI AC wi l l con ti n u e to be del a yed u n ti l December 31 , 20 1 7 , du e to l ow pu n ctu a l i ty.However, SI AC i s a l l owed to rea l l oca te i ts exi sti n g f l i gh t ca pa ci ty toi n tern a ti on a l /regi on a l rou tes f rom domesti c on es.

Ou r pri ce ta rget of HK$47 .0 2 i s deri ved f rom ou r proba bi l i ty- wei gh ted a vera ge ofscen a ri o va l u es. Ou r ba se ca se va l u e i s deri ved f rom ou r DCF va l u a ti on . We a ssume aWACC of 1 0 . 1 % ba sed on a cost of equ i ty of 1 1 .2%, a cost of debt of 5.5%, a n d acon si sten t ta rget stru ctu re of 85% equ i ty a n d 1 5% debt. We u se a beta of 0 .9 on th eba si s of i ts two- yea r weekl y beta f rom B l oomberg. We a ssume a termi n a l growth ra te of2%.

Ou r wei gh ti n gs f or th e bu l l , ba se, a n d bea r ca se scen a ri os a re 20%, 7 5% a n d 5%,respecti vel y. We a ppl y th e h i gh est proba bi l i ty (7 5%) to ou r ba se ca se scen a ri o, gi venSI AC' s h i gh l y predi cta bl e ca sh f l ows a n d ea rn i n gs ou tl ook. We see a rel a ti vel y stron gproba bi l i ty of ou r bu l l ca se pl a yi n g ou t i n vi ew of su sta i n ed tra f f i c growth a n d i n crea si n gpri ci n g power i n th e l on g ru n . We a tta ch a sl i gh t wei gh ti n g to ou r bea r ca se beca u se weth i n k th ere a re ri sks f rom con ti n u ed l ow pu n ctu a l i ty, l ea di n g to restri cti on s on ef f ecti veca pa ci ty growth , a s wel l a s th e ri sk of cost i n f l a ti on du e to ra pi d i n crea se i n ren ta lpa ymen t to i ts pa ren t.

Key downside risks to our price target: 1 ) l ower- th a n - expected tra f f i c growth a n d ta ri f fh i kes; 2) n o improvemen t i n pu n ctu a l i ty perf orma n ce; 3) ca pex overru n s f or ph a se I I Ibu dget; 4) exogen ou s ri sks, su ch a s n a tu ra l di sa sters, i n tern a ti on a l con f l i cts a n d severegl oba l recessi on s.