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Sijia Jiang

Analysts are confident about the prospects of Spring Airlines, China's only listed budget carrier and Asia's biggest by market valuation, after it posted a 20.75 per cent jump in net profit in its first results announcement since it was floated on the Shanghai stock exchange in January.
The privately owned airline said net profit grew to 884.2 million yuan (HK$1.1 billion) last year from 732 million yuan in 2013, beating expectations.
Turnover was 7.3 billion yuan, up 11.64 per cent.
The company's share price dropped 3.79 per cent yesterday to close at 92.28 yuan. That is still more than five times its initial public offering price of 18.06 yuan on January 21.
Spring's market value is now 37 billion yuan, almost four times that of Malaysia's AirAsia, the region's leading budget carrier.
"North Asia will be the focus of our expansion," company spokesman Zhang Wuan said. "We expect Japan to remain a favourite destination for Chinese tourists."
Zhang also said Spring Japan, the company's overseas subsidiary, would begin international flights in May.
Having an overseas subsidiary is a first for a mainland airline. Spring Japan has been flying domestically since August.
Analysts said the stock's sharp growth was justified given the untapped potential of budget air travel in China, which is poised to overtake the United States as the world's largest aviation market.
"Spring taps China's mass leisure travel market, which is steadily growing and basically unaffected by economic cycles," said Shen Xiaofeng, an analyst with China International Capital Corp. "Its business model allows for a low-cost operation with a steady profit margin that has potential to rise further with more international traffic and ancillary revenue."
Shen raised the target price for the stock to 150 yuan from 120 yuan following the earnings results.
He also forecast earnings to grow 35 per cent to 1.19 billion yuan this year and rise a further 43.5 per cent to 1.7 billion yuan next year.
A US$10 drop in Brent oil prices this year to a likely US$50 a barrel would bring an extra 20 per cent earnings boost, he said.
Shen said the airline's plan to double its fleet to 100 aircraft by 2018 meant an annual capacity addition of 20 per cent, for which there was no shortage of demand.
Spring carried 11.4 million passengers last year with an average load factor of 93.07 per cent, according to its results announcement. Ancillary revenue reached 36 yuan per passenger and resulted in a profit contribution of 130 million yuan.
"Spring has a net profit margin much higher than the major carriers, thanks to its low-cost model … Given the ample room of growth for China's air travel penetration, and the government's policy to encourage low-cost carriers, Spring is expected to continue to grow," Guotai Junan Securities said in a note.
Founded by Shanghai businessman Wang Zhenghua in 2004 to provide charter services for his Spring International Travel Agency, Spring operates a fleet of 51 Airbus A320s serving more than 100 routes in Asia.
Wang owns 25 per cent of Spring after it became the fifth listed airline on the mainland.


Analysts thumbs up for Spring Airlines after profit surge

Spring Airlines plans to focus its expansion in North Asia and will increase the size of its fleet to 100 aircraft by 2018. Photo: AFP

Business

Companies

Prospects seen bright for Asia's largest budget carrier after profit surge


Analysts are confident about the prospects of Spring Airlines, China's only listed budget carrier and Asia's biggest by market valuation, after it posted a 20.75 per cent jump in net profit in its first results announcement since it was floated on the Shanghai stock exchange in January.


Analysts thumbs up for Spring Airlines after profit surge

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Prospects seen bright for Asia's largest budget carrier after profit surge

Prospects seen bright for Asia's largest budget carrier after profit surge