20180619-东英亚洲证券-航基股份-00357.HK-Downgrade_on_negative_surprise_in_the_abolition_of_rebate_6页_1mb

HNA Infrastructure (357 HK) Equity Research Summary

Core Information

• Company Name: HNA Infrastructure Company Ltd
• Stock Code: 357 HK
• Current Price: HK$7.92
• Target Price: HK$8.70 (+10%)
• Prior Target Price: HK$14.60
• Market Cap: HK$3,747.85 million
• Issue Shares: 226.91 million
• 3M Avg Daily Volume: 0.62 million
• Major Shareholder: Meilan Intl Airport (50.2%)
• Fiscal Year: 12/2017
• 12 Months High: HK$12.30
• 12 Months Low: HK$6.15

Key Events

• Abolition of CADF Rebate: HNAI announced that the Ministry of Finance (MoF) would abolish the Civil Aviation Development Fund (CADF) rebate for all three listed airports, including HNAI, BCIA, and GBIA. This was a negative surprise to the market, as investors had expected the rebate to be extended to 2020.
• Transition Period: A half-year transition period up to 29th Nov 2018 was provided.
• Impact on Revenue: The CADF rebate accounted for 17.4% to 17.8% of HNAI's total revenue in FY15/16/17.
• Revenue & Profit Adjustment: Due to the rebate abolition, the research team reduced their FY18E revenue estimate by 1.3% and FY19E by 13.3%, and net profit estimates by 3.1% and 36.3%, respectively.
• Downgrade: The rating was downgraded from BUY to HOLD, with the target price cut to HK$8.70, based on a 12x EV/EBITDA multiple for FY20E, which is 50% premium to peers.

Financial Overview

Financial Impact

• Revenue Changes:
  • FY18E revenue revised to RMB1.837bn from RMB1.862bn (-1.3%)
  • FY19E revenue revised to RMB2.259bn from RMB2.606bn (-13.3%)
• Net Profit Changes:
  • FY18E net profit revised to RMB540.2mn from RMB558mn (-3.1%)
  • FY19E net profit revised to RMB424.4mn from RMB666mn (-36.3%)
• EBITDA Changes:
  • FY18E EBITDA revised to RMB947mn from RMB970mn (-2.4%)
  • FY19E EBITDA revised to RMB1,016.4mn from RMB1,337mn (-24.0%)

Risks

1. Passenger Throughput Growth: Could be higher or lower than expected.
2. Policy Risks: Related to government regulations and changes.
3. Traffic Ramp-Up: Slower or faster ramping up of traffic to terminal complex and living service areas.

Peer Group Comparison

Summary of Financial Ratios

Recent Reports

Historical Recommendations

Summary

HNA Infrastructure (357 HK) is a company that provides a range of services at Meilan Airport, including airfield services, terminal facilities, ground handling, and retail operations. The company was downgraded from BUY to HOLD due to the unexpected abolition of the CADF rebate, which significantly impacted its revenue and net profit projections. The target price was revised down to HK$8.70, based on a 12x EV/EBITDA multiple for FY20E, with a 50% premium to peers. The transition period for the rebate removal was up to 29th Nov 2018, after which HNAI would no longer recognize it as revenue.

Financial performance showed revenue growth from FY16 to FY18, but net profit declined significantly in FY19E due to the loss of the rebate. The company's EBITDA and net profit were adjusted downward to reflect the impact of the rebate. Key risks include passenger throughput growth, policy changes, and traffic ramp-up to terminal complex and living service areas.

The company's financial ratios indicate a declining gross margin and net margin in FY19E, while debt levels increased. The peer group comparison highlights HNAI's higher EV/EBITDA multiple and lower net margin compared to its competitors.

Overall, the downgrade reflects the negative impact of the CADF rebate abolition on the company's financial outlook, despite its geopolitical advantages from being based in the Hainan Free Trade Zone.