2Q25 results beat our expectations Eastern Air Logistics announced its 1H2025 results: Revenue fell

0.26% YoY to Rmb11.26bn. Gross profit stayed flat YoY at Rmb2.11bn.

Attributable net profit grew 0.90% YoY to Rmb1.29bn. In 2Q25, revenue fell 4.8% YoY but rose 5.2% QoQ to Rmb5.77bn; gross profit fell 10.3% YoY but rose 20.1% QoQ to Rmb1.15bn; net profit attributable to shareholders grew 8.0% YoY and 36.3% QoQ at Rmb743mn. The 2Q25 earnings grew despite headwinds, beating our and market expectations, mainly due to the expansion and efficiency of its all-cargo fleet, falling financial and fuel costs, and rising subsidies and other income.

By business segment, revenue performance in 2Q25 varied significantly: air express revenue increased 13.4% YoY, integrated logistics revenue declined 21.0% YoY, and ground services revenue grew 6.0% YoY. Gross profit rose 3.2% YoY for air express, but fell 24.7% YoY for integrated logistics and 12.2% YoY for ground services.

In 1H25, cross-border e-commerce freight volume decreased 30% YoY to 47,670t, with revenue falling 27% YoY to Rmb2.04bn, primarily due to tariff impacts on small e-commerce parcels. Ground services profitability faced pressure from rising labor costs.

Expense management showed positive developments in 2Q25: G&A and selling expenses remained stable, while financial expenses decreased 62% YoY to Rmb26mn. This reduction was mainly attributed to lower interest expenses and foreign exchange losses, partially resulting from the transition of certain aircraft from leasing to ownership arrangements.

Other income increased by 383% YoY to Rmb122mn in 2Q25, largely due to government subsidies received for new route operations.

Trends to watch Tariff disruptions continued to weigh on demand for US routes, while the structure of international routes became increasingly diversified.

Throughout 1H25, frequent adjustments to US tariff policies-including the removal of exemptions for small e-commerce parcels-significantly dampened airfreight demand on US routes. According to Seabury, China’s cargo exports to North America declined 8.2% YoY to about 464,000t, with the proportion of US routes in China’s total airfreight exports falling 3.5ppt YoY to 15.9%.

The overall structure of China’s export routes continued to diversify.

China’s total export airfreight volume increased 12% YoY in 1H25. Exports to Europe, Asia-Pacific, and other regions grew 15.4%, 12.2%, and 22.2% YoY, with emerging markets compensating for the decline in US route volume.

The firm’s fleet expansion has enhanced operational efficiency, while its flexible route adjustments and comprehensive service offerings have demonstrated strong operational resilience. In 1H25 and July-

August, the firm introduced four B777 all-cargo aircraft (two in each period), bringing its total fleet to 18 all-cargo aircraft as of end-August, a 28.5% YoY increase.

Through dynamic optimization of its flight network, the firm improved the operating efficiency of its cargo aircraft. In 1H25, it added three scheduled routes and expanded into emerging markets across Southeast Asia, Europe, and South America. These initiatives helped increase the daily utilization rate of its cargo aircraft by 0.61 hours YoY to 13.55 hours, while total cargo and mail turnover rose 5.6% YoY to 4.1bn tonne-kilometers.

Amid pressure on cross-border e-commerce demand, the firm effectively mitigated risks through business diversification, including cold chain services. Revenue from direct delivery to production areas increased 37% YoY to Rmb1.98bn in 1H25.

Financials and valuation

We raise our 2025 and 2026 earnings forecasts 25.2% and 22.0% to Rmb2.68bn and Rmb2.85bn, as the firm’s fleet expansion and operations are more resilient than we expected, and considering the sustainability of other income in 2Q25. The stock is trading at 9.2x and 8.6x 2025e and 2026e P/E. We maintain an OUTPERFORM rating, and given the abovementioned reasons, we raise our target price 27.6% to Rmb18.50, implying 11.0x 2025e and 10.3x 2026e P/B, offering 19.4% upside.

Risks

Disappointing fleet expansion; changes in international trade policies; weaker-than-expected demand for cross-border e-commerce.