2024 results miss market expectations; 1Q25 results largely in line with our forecast

Eastern Air Logistics announced its 2024 results: Revenue rose 17% YoY to Rmb24.1bn, gross profit grew 5% YoY to Rmb4.67bn, and net profit attributable to shareholders grew 8% YoY to about Rmb2.69bn. Based on this, we calculate that 4Q24 revenue remained flat YoY at Rmb6.38bn, gross profit fell 9% YoY to Rmb1.28bn, and net profit attributable to shareholders declined 25% YoY to Rmb621mn. The firm’s 2024 results missed market expectations, as earnings were under pressure YoY due to retrospective adjustment of passenger aircraft freight negotiation rates and a slight rise in related labor costs.

The company also announced its 1Q25 results: Revenue rose 5% YoY to Rmb5.49bn, with that from air express, integrated logistics, and ground services up 3%, 7% and 5% YoY. Gross profit grew 16% YoY to Rmb958mn. Gross profit from airline express and integrated logistics increased 14% and 38% YoY, while that of ground service declined 8% YoY. Net profit attributable to shareholders fell 7% YoY to around Rmb545mn, mainly due to a high base caused by disposal of all-cargo aircraft in 1Q24. Excluding the high base effect, total profit rose 15% YoY in 1Q25, largely in line with our expectations.

Trends to watch

We attribute the firm’s steady earnings growth to the following: 1) Business volume of the cross-border e-commerce business and the business of direct delivery from the producing area increased rapidly. In 2024, revenue from the two businesses increased 26% and 73% YoY to Rmb5.9bn and Rmb3.3bn. 2) Operating efficiency of all-cargo aircraft improved. In 2024, the daily utilization rate of all-cargo aircraft rose 3.6% YoY to 13.01 hours (according to the company’s announcement), a new high since 2018. 3) Part of the costs declined. In 2024, aviation fuel costs dropped 9.17% YoY thanks to falling oil prices.

The firm has taken the initiative to optimize its debt structure, and it has strengthened shareholder returns. The firm took the initiative to optimize its debt structure and repurchased three leased aircraft in advance in 2024, reducing its gearing ratio to 26.21% (down 14.7ppt YoY). The firm planned to pay a total dividend of Rmb1.08bn in 2024, implying a payout ratio of 40% (vs. 30%, 15% and no dividend payout in 2021-2023), implying stronger shareholder returns than in previous years.

Financials and valuation

We cut our 2025 net profit forecast 45.4% to Rmb2.14bn due to rising uncertainties in “reciprocal tariffs”. We introduce a 2026 net profit forecast of Rmb2.34bn (+9.4% YoY). The stock is trading at 9.0x and 8.3x 2025e and 2026e P/E. Maintain OUTPERFORM. Considering earnings forecast revisions and the growth potential of the firm’s integrated logistics business, we cut our TP 34.4% to Rmb14.5, implying 10.8x 2025e and 9.8x 2026e P/E, offering 19.2% upside.

Risks

Increasing tariff risks; default on long-term contracts; disappointing introduction of related aircraft.