Cathay Pacific Haitong: The increase in passenger flow in the aviation industry during the summer season expands the determination of highway and port dividends

The Zhitong Finance App learned that Cathay Pacific Haitong released a research report stating that it will maintain the aviation oil transportation holdings increase rating. With oil prices falling, the aviation supercycle logic of a long period can still be expected. Fare is marketed and supply is growing low. Boosting consumption will help supply and demand continue to improve and seize bottom-line opportunities. In terms of oil transportation, if oil supply and demand return to high levels in the straits, Iran's lifting of the ban is expected to be extremely prosperous and sustainable. Geographical conflicts do not change medium- to long-term logic; focus on reverse timing.

Cathay Pacific Haitong's main views are as follows:

Aviation: The increase in passenger traffic during the summer season is expanding, and ticket prices are stable, and we look forward to improvements in airline business strategies

Last week, the year-on-year increase in passenger traffic during the summer season increased to nearly 8%, and the passenger occupancy rate rose by more than 1 pct year over year to a high of 86%; it is estimated that domestic fuel-containing ticket prices fell by nearly 10% year on year, reflecting weak demand and airlines exchanging price for volume. Domestic aviation fuel prices fell by more than 20% in July compared to Q2. Considering repeated oil prices, domestic oil prices are expected to rise by more than 40% during the summer season. Weak demand during the summer travel season and the year-on-year pressure on oil prices will affect the airline's profit in July. Recently, major airlines have successively withdrawn from the China Aviation Information ICS system (the airline's core flight management system) mutual understanding agreements. The bank believes that it is expected to push the airline's revenue management focus from “peer competition” to “passenger demand,” which will help reduce irrational competition and improve revenue management. It is recommended to pay attention to subsequent changes in airline business strategies and ticket price trends. The “15th Five-Year Plan” aviation supply has entered an era of low growth. Demand growth will drive supply and demand to continue to improve and profit centers to rise in the long-term logical interpretation. We recommend Air China/China Eastern Airlines/Juneyao Airlines/Spring Airlines/China Southern Airlines.

Oil transportation: Geographical conflict causes oil transportation demand to shrink, and short-term freight rate adjustments may provide reverse timing

1) Short-term: Since July 22, the Houthis imposed a maritime embargo on Saudi Arabia, traffic through the Mander Strait was reduced by more than 20% month-on-month, and crude oil exports from Yanbu Port were reduced by more than half; at the same time, traffic through the Strait of Hormuz remained low, less than 10% in February. Freight rates declined due to reduced demand for oil transportation. Last week, the TCE for VLCC's US Gulf and Africa routes fell below 100,000 US dollars. The industry expects that if the geographical conflict continues, there is still a risk that short-term freight rates will continue to fall, but the supply rigidity and boom of oil transportation will continue in the next few years. 2) Mid-term: Repeated geographical conflicts may be aimed at competing for future strait control. The industry believes that it may be difficult to fully recover the strait in the second half of the year, but recovery in early 2027 can still be expected. If the strait recovers, the oil transportation capacity utilization rate will return to the high level before the conflict, and Changjin's control and inventory replenishment will be further icing on the cake. 3) Long-term: If Iran lifts the ban, the oil transport compliance market is expected to be extremely prosperous and sustainable for several years. Short-term freight rate adjustments or reverse timing are provided, and the dividend rate supports the lower valuation limit. We recommend COSCO Haineng/China Merchants Steam/China Marine Leasing.

Transportation dividends: Expressway and port performance are steady, dividends are determined, and dividends are still preferred

Transportation dividend targets recommend sub-sectors with stable cash flow, steady growth in performance, and stable dividend policies. Highways and high-quality ports are preferred. 1) Highways: Traffic demand is resilient. The bank expects high oil prices in Q2 to have limited impact on demand, and is expected to continue the Q1 trend. By region, demand in East/Southwest China is relatively more resilient. North China is affected by coal mine supplies, and South China is affected by bad weather. It is expected that in 2026, although the pressure drop space for LPR's financial expenses will be reduced steadily, the cost of maintenance etc. may be higher than the national inspection year, or there is still room for pressure drop. If the location is excellent and the risk of expansion is limited, it is recommended to recommend the Wantong Expressway/China Merchants Highway/Ninghu Expressway. 2) Ports: Cargo volume is expected to increase year-on-year in Q2. Among them, shipping on European and American routes was shipped early due to concerns about risks such as additional tariffs and continued price increases in the second half of the year. Dry bulk cargo benefited from active Australian mining shipments and strong demand for coal, and cargo volume increased markedly. Related targets include Tangshan Port/Qingdao Port, etc.

Risk warning: economic fluctuations, geographical oil prices, tariffs, exchange rates, safety incidents, etc.