Results Review

3Q25 results largely in line with our expectationsSpring Airlines announced its 3Q25 results: Revenue rose 6.0%YoY to Rmb6.47bn and net profit attributable to shareholders fell6.2% YoY to Rmb1.17bn, largely in line with our expectations.

The YoY decline in profit was mainly due to falling airfares andrising unit costs in 3Q25.

The firm’s available seat kilometers (ASK) grew 14.1% YoY in3Q25, leading growth among major listed airlines. This wassupported by higher aircraft utilization and an accelerated paceof aircraft introduction.

Airfare declined; revenue growth was slower than demandgrowth. Despite a 14.0% YoY increase in passenger turnover,revenue grew only 6% YoY, reflecting downward pressure onticket prices.

Unit cost excluding fuel rose noticeably. While unit operatingcost increased 0.6% YoY, this occurred against an 11.2% YoYdecline in domestic oil prices. The increase in non-fuel unit costswas likely driven by higher aircraft take-off and parking feesassociated with expanded international operations, as well as asharp rise in aircraft maintenance expenses.

Trends to watch

We expect the firm’s ASK to grow approximately 12% YoYin 2025 and exceed 10% annually through 2026–2027. Thefirm is accelerating pilot training to improve aircraft utilizationand actively sourcing new aircraft, supporting this rapid capacityexpansion.

Weak demand in Southeast Asia continues to weigh onperformance, though increased deployment on Japaneseand South Korean routes provides a partial offset. However,heightened investment in these markets may pressure theirprofitability. A gradual recovery in Southeast Asian traveldemand should support future earnings improvement in the　　international segment.

Cost pressures are likely to persist over the next 1–2 years.

The rapid expansion of international operations has drivensignificant growth in aircraft-related expenses, including take-off,landing, parking, and catering costs, alongside high globalmaintenance outlays. These factors are not expected to beresolved in the near term

Financials and valuation

We keep our 2025 and 2026 earnings forecasts unchanged atRmb2.53bn and Rmb3.02bn, and the stock is trading at 20.7xand 17.3x 2025e and 2026e P/E. Maintain our target price ofRmb67.9, implying 26.2x and 22.0x 2025e, offering 27.3%upside. Maintain OUTPERFORM.

Risks

Sharp rise in oil prices; slow recovery of market demand inSoutheast Asia; slow introduction of aircraft.