202 1 130, Shanghai Airport issued the Announcement on Signing the Supplementary Agreement of the Duty Free Shop Project Management Right Transfer Contract. Since then, Shanghai Airport has fallen for two consecutive trading days. There is a fierce confrontation between institutions about whether the investment logic of Shanghai Airport has changed. This paper will analyze the leading civil airport-Shanghai Airport, which has been occupied by Public Offering of Fund for more than ten years, from the aspects of historical evolution and fundamentals, business model, competition pattern, moat and internal logic. In order to explain the growth logic of the company more clearly, this paper will mainly tell the company from two aspects before and after the epidemic.
Before the epidemic
I. Historical evolution and basic principles
Force … to do …; (Shanghai) Shanghai
At the end of 1987, the civil aviation management system was greatly reformed. The former Shanghai Civil Aviation Administration was divided into East China Civil Aviation Administration, China Eastern Airlines and Shanghai Hongqiao International Airport. According to the prospectus of Shanghai Airport, Shanghai Airport is a unified management company of Shanghai Hongqiao International Airport and Pudong Airport (still under construction at the time of listing). The controlling shareholder is Shanghai Airport (Group) Co., Ltd., and most of the funds raised from listing are used for the construction of Pudong Airport. The first phase of Pudong Airport was completed at the end of 1999. In 2002, the duty-free shop in Hongqiao Airport was closed. In 2003, the landing gear and passenger throughput of Pudong Airport surpassed each other.
In 2003, the company exchanged assets with Shanghai Airport (Group) Co., Ltd., and the company exchanged the business and related assets and liabilities of Hongqiao International Airport with the 40% interest of Shanghai Pudong International Airport Aviation Oil Co., Ltd. held by Pudong International Airport and the group company.
The 2005 annual report pointed out that the main business of Shanghai Airport has been transferred to Pudong International Airport.
After the second phase project, the first phase reconstruction and the third phase project, Shanghai Pudong Airport became the first and only airport with five runways in China. It can meet the passenger flow of 80 million passengers a year.
At this point, the business of Shanghai Airport has basically taken shape and tends to be stable.
Looking at the equity structure map of Shanghai Airport, it can be said that it is very simple.
According to the semi-annual report of Shanghai Airport in 2020, there are 1 1 shareholding or holding companies in Shanghai Airport. Among them, Gaode Power and Aviation Oil contributed the most to the profits of Shanghai Airport.
Second, the business model
The company manages Pudong Airport, and its current business is mainly divided into aviation business and non-aviation business. Aviation business refers to the basic business directly related to aircraft, passengers and cargo services; Other similar extension business, office leasing, check-in counter leasing, etc. All are non-aviation businesses. Pudong airport belongs to the first class airport. At present, the charging standards for aviation services and other charging items are subject to government-guided prices according to relevant documents of the Civil Aviation Administration, and the charging standards for non-aviation services are subject to market-adjusted prices.
According to the annual report of Shanghai Airport. In 20 12, the proportion of aviation revenue in Shanghai airport dropped to half of the total revenue, and the revenue from commercial catering rental rose to 30%. In the annual report of 20 16, the income source items were subdivided for the first time. In 20 17, non-aviation revenue exceeded aviation revenue for the first time, and the gross profit margin of non-aviation revenue exceeded aviation revenue for the first time.
Aviation business used to be the pillar business of the airport, but non-aviation income surpassed it with a very high growth rate in 20 17. Among the non-aviation income, the duty-free business of Shanghai Airport is the main one. With its tax-free business model, the airport has great voice and bargaining power in the negotiation. Among the major airports in China, Shanghai Airport has the largest international passenger flow and the highest proportion, which naturally has fertile soil and potential for duty-free business. In 20 19, the tax-free income of Shanghai Airport exceeded the aviation income, which became the main income source of Shanghai Airport and brought strong consumption attributes to Shanghai Airport.
Tax-free income has become the main income source of Shanghai Airport and the fastest growing business. Shanghai Airport, as a public enterprise, has weakened periodicity by using consumption attributes.
Third, the competition pattern.
The competition pattern of civil airports will be analyzed from five aspects: aviation business, profitability, transportation capacity, duty-free business and geographical location.
(1) aviation business
Among the major international airports in China, Shanghai Airport has the highest proportion of international and regional passengers, exceeding 50% in 20 19. In the Notice on the Adjustment Scheme of Civil Airport Charge Standard, because international flights usually use medium and large passenger planes with heavy tonnage, the aviation expenses such as landing fees for international flights are much higher than those for domestic flights. This is an important reason why the profitability of Shanghai Airport's aviation business is stronger than that of large airports such as Capital Airport.
In 20 19, the revenue scale of Shanghai Airport exceeded that of Capital Airport, and the decline of revenue scale of Capital Airport was related to the commissioning of Daxing Airport.
(2) Profitability
The ROE of Shanghai Airport is the highest among the four major airports, and it has been on the rise over the years. As can be seen from the annual report, the gross profit margin and net profit rate of aviation business and non-aviation business of Shanghai Airport are higher than those of other airports, and the income of various businesses has also increased steadily.
Although it was not until 20 19 that the revenue of Shanghai Airport surpassed that of Capital Airport, and the annual passenger throughput of Capital Airport has always been the largest airport, the net profit and ROE of Shanghai Airport have always been far ahead, showing strong capital utilization ability and profitability transformation ability.
It is worth mentioning that every expansion project and transformation of Shanghai Airport uses the company's own funds, which reflects the strong financial control ability of Shanghai Airport. Since the company went public, it has only issued corporate bonds once, and the company has abundant cash flow and has the ability to deal with emergencies such as epidemics.
(3) Production capacity and transportation capacity
At present, Shanghai Airport is the only airport with five runways in China, and its production capacity is second only to the Capital Airport, far exceeding that of Shenzhen Airport.
(4) Duty-free business
The main business source of Shanghai Airport in recent years is tax-free income. The duty-free business area of Shanghai Airport is very large, and with the 20 19 satellite hall put into operation, the business area of Shanghai Airport is very large. Judging from the per capita duty-free consumption of major airports, Shanghai Airport is indeed the airport with the strongest profitability in duty-free business, and there is no one.
(5) Geographical location
From the geographical location of Shanghai Airport, the Yangtze River Delta is the largest urban agglomeration in China, with a total population of over 200 million, far ahead of Sichuan, Chongqing and Beijing-Tianjin-Hebei regions. At the same time, the Yangtze River Delta is also an urban agglomeration with the most developed economy and the highest per capita GDP in China, with strong purchasing power and consumption power. Among the dozens of airports in the Yangtze River Delta, Shanghai Airport is the only one (only one airport with non-aviation important business implements market price adjustment), strategically positioned as an international aviation hub, and the diversion effect of surrounding airports on Shanghai Airport is extremely limited.
Fourth, the moat and the underlying logic.
(A) the overlord of the Yangtze River Delta Airport Group
The Yangtze River Delta is an urban agglomeration with the largest economic population, the widest area, the highest per capita GDP and the largest import and export trade volume in China. Being the airport with the highest share in the Yangtze River Delta region means that there are the most potential customers and a greater source of potential profits. Guangzhou Baiyun Airport and Shenzhen Baoan Airport in the Pearl River Delta Airport Group are Class I airports, and Hong Kong International Airport is an international aviation hub in the Asia-Pacific region. The location of the three airports is concentrated, and there is little difference in passenger throughput, which has a certain diversion effect between airports, and the advantages of regional hub airports are not obvious. In the Beijing-Tianjin-Hebei airport group, due to the early completion of the Capital Airport, some facilities are congenitally insufficient and outdated, and the Capital Airport is in the "window period" of flight transition on some routes. In addition, Beijing Airport is also facing the transformation and upgrading of its development structure. In the future, some international hub functions will be transferred to Daxing Airport, and some non-core hub functions will be relieved to Tianjin and Shijiazhuang airports, and the absolute advantage will be weakened. Among the airports in the Yangtze River Delta, Shanghai Pudong Airport is positioned as an international aviation hub, and the proportion of international passenger throughput is much higher than other airports in the Yangtze River Delta. Shanghai Hongqiao Airport is positioned as a domestic aviation hub, which only diverts some domestic passengers, while the airports in the surrounding areas are all second-class or third-class airports, with relatively far geographical location and limited diversion impact. The layout of the Yangtze River Delta Airport is well planned, and Shanghai Airport has a clear positioning and outstanding location advantages.
(2) Excellent international geographical position
Shanghai is the largest economic center city in China, located at the end of the triangle route between Asia, Europe and North America. The sailing time to Europe and the west coast of North America is about 10 hour, and the time to major cities in Asia is within 2 to 5 hours, so the voyage is moderate. Located at the intersection of the eastern coastal economic development belt of China and the Yangtze River Economic Belt, Shanghai directly serves the Yangtze River Delta, and is the economic sector with the fastest economic development, the largest economic aggregate and the most development potential in China. The two-hour flight circle in the indirect service area is rich in resources, including 80% of the top cities in China 100, 54% of the land resources and 90% of the population, 93% of the GDP export area and most of Japan and South Korea. Shanghai is located at the intersection of the eastern coastal economic development belt of China and the Yangtze River Economic Belt, and its direct service area is the Yangtze River Delta region. At present, there are 16 civil airports in the Yangtze River Delta. In 2065,438+09, the airport passenger throughput in the Yangtze River Delta region was 240 million, higher than that in Guangdong-Hong Kong-Macao Greater Bay Area (202 million) and Beijing-Tianjin-Hebei (1.50 million). In the Yangtze River Delta region, Shanghai Airport has the highest level, the highest passenger throughput and the densest international flights, which is the core of the Yangtze River Delta Airport.
(3) Excellent fund management and control ability and operational ability.
Shanghai Airport is the only airport that has not received external financing for expansion and reconstruction, and the project funds of Shanghai Airport are all paid by its own funds. The outstanding characteristics of Shanghai Airport are low asset-liability ratio, abundant free cash flow, strong ability to create cash flow, good ability to use funds, high gross profit margin and net interest rate, and stable dividends. Even under the negative influence of the trade war and the unstable situation in Hong Kong, Shanghai Airport has maintained a high profit and a stable growth rate.
(4) tax-free industries with sustained high prosperity
20 17-20 18 after China international travel service acquired Shanghai China, China's duty-free business opened an era of rapid growth. Airports and duty-free shops are a bit like the relationship between landlords and tenants. In bargaining negotiations, Shanghai Airport can better grasp the right to speak. As can be seen from the 20 19 annual report of China International Travel Service, Shanghai Airport has taken more than 80% of the profits of China International Travel Service, and its bargaining power is excellent. Compared with the duty-free in Hainan Island, the occupancy rate of duty-free shops in Shanghai Airport is very high, nearly twice that of Hainan Island. It usually takes about half an hour to get there by high-speed train, but most people will choose to fly to the airport one or two hours in advance, and the airport is the last stop before international passengers leave the shore, which is the natural advantage of airport duty-free shops.
(v) Stable and profitable equity investment.
There are more than ten joint ventures or joint ventures in Shanghai Airport, among which airport advertising and jet fuel have contributed the most to the airport performance. Gaode Momentum's advertising business has been extended to Chongqing Jiangbei Airport and other large airports, and its profit contribution to Shanghai Airport will be greater and greater in the future. With the increase of crude oil price, jet fuel is expected to increase its profit. By the way, the runway and terminal of Shanghai Airport are owned by the parent company Airport Group, accounting for 17% of aviation revenue every year. It should be noted that the decrease of passenger flow in recent years has brought about the decrease of aviation revenue, and the profit ratio of Shanghai Airport will be higher when the rent is stripped.
After the epidemic
Let's take a look at the impact of SARS on Shanghai airport revenue in 2003. In 2003, the operating income of Shanghai Airport increased by 7% against the trend, but its liabilities decreased by 20%. In addition, the duty-free shop moved to Pudong Airport in 2003. Although Pudong Airport depreciated sharply, it still maintained a healthy financial situation, indicating that SARS had little impact on the profits of Shanghai Airport that year.
Let's look at the new contract between Shanghai Airport and Bao Zhong, China. To put it simply, the original contract that the airport charged the highest guaranteed price and sales commission has now become 80% of the international passenger flow of 20 19, with commission; 80% of 20 19 international passenger flow is guaranteed. It means that the rent charged by Shanghai airport has changed from "bottomless and headless" to "bottomless and headless", and rent collection is decoupled from sales. However, in the case that the short-term epidemic will not recover soon, it is a compromise and concession made by Shanghai Airport to maintain its channel advantage.
At present, Shanghai Airport has released its performance forecast for 2020, and its revenue is not as good as expected. However, under such differences, let's make a prospect for the future of Shanghai Airport.
According to the transportation production bulletin issued by Shanghai Airport, with the improvement of overseas epidemic situation, the number of international passengers at Shanghai Airport will continue to increase. With the large-scale inoculation of superimposed vaccines, there is already room for imagination to control the epidemic.
prospect
Let's review the growth logic of Shanghai Airport and ask investors six questions:
(1) Shanghai Airport is the dominant civil airport in the Yangtze River Delta, an economically developed area. Will this situation change after the epidemic?
(2) The international geographical location of Shanghai Airport is very superior, and this advantage does not need to pay any cost. Will this situation change after the epidemic?
(3) Shanghai Airport has strong management ability, capital utilization ability and profit conversion ability. Will this situation change after the epidemic?
(4) Shanghai Airport has a high degree of duty-free business and is one of the airports with the largest business area. Will this situation change after the epidemic?
(5) Shanghai Airport is the international gateway airport of China, strategically positioned as an international hub, which is absolutely scarce. Will this situation change after the epidemic?
(6) Shanghai Airport has the largest number and the highest proportion of international passengers among China airports. Will this situation change after the epidemic?
Whether the underlying logic of Shanghai Airport has changed in the future, after reading this article, I believe most investors have their own answers.
Note: Some information and data sources in this paper are Shanghai Airport Prospectus, Shanghai Airport Annual Report 200 1-20 19 and Shanghai Airport Semi-annual Report 2020. I want to thank the following analysts for their efforts.
Chen, an analyst at Southwest Securities Shanghai Airport (600009): Non-aviation revenue shines brilliantly, and the cost side also expands rigidly (securities industry code S1250518110001).
Huatai Securities analyst "Shanghai Airport (600009): The traffic is rising steadily, waiting for the catalysis of vaccine research and development" —— Shen Xiaofeng and Huang Fanyang (securities industry code S057051610001,S0570519090066).
Zhongtai Securities's Shanghai Airport (600009): Crossing Mountains and Rivers, Waiting for a Bright Future —— Xing Lili and Ceng Ming (securities industry code S0740518100001,S07405 18070008).
HOR] Gu Ximin, analyst of Minsheng Securities, Shanghai Airport (600009): Whether it is too late or not, it will be safe for a long time (securities industry code S 0100519080001).
TF Securities's "Shanghai Airport (600009): China Core International Airport, with non-aviation as its main business" analysts-Ming Jiang and Zeng Fanzhe (securities industry code S1105161/KLOC-0.
Zhang Jun, analyst of Guo Sheng Securities (stock industry code S06805 180 10004) "Shanghai Airport (600009): Build a nest to attract phoenix and realize traffic".
Jiang Nan, analyst of Zheshang Securities, Shanghai Airport (600009): On the Investment Value of Shanghai Airport from the Perspective of Business Model and Financial Quality (securities industry code S1230515120001).
All the above are team views and do not constitute investment advice. Take this as the investment basis, at your own risk.