CICC: Maintains "outperform" rating on BEIJING AIRPORT (00694), target price of 2.9 Hong Kong dollars.

CICC releases research report maintaining BEIJING AIRPORT (00694) "outperform industry" rating, with a profit forecast of -478 million yuan / 182 million yuan in 2024/2025 unchanged, and a target price of 2.9 Hong Kong dollars. BEIJING AIRPORT recently released a supplementary agreement regarding the management entrusted by the advertising business and international retail business (hereinafter referred to as the "Supplementary Agreement"). According to the Supplementary Agreement, the entrusted management fee for the international retail business by the Trading Company (a wholly-owned subsidiary of the parent company of Capital Airport) has been reduced from 20% to 10%, and the entrusted management fee for the advertising business by the Media Company (a wholly-owned subsidiary of the parent company of Capital Airport) has been reduced from 22% to 16%; the effective period is from September 19, 2024 to the end of 2026; at the same time, the upper limit of related transactions for the entrusted management of international retail business from 2024 to 2026 has been reduced from the original 2.4, 3.7, 5.1 billion yuan to 0.9, 1.1, 1.4 billion yuan, while the upper limit of related transactions for the entrusted management of advertising business has been reduced from the original 2.0, 2.5, 2.7 billion yuan to 1.51, 1.70, 1.92 billion yuan. The bank believes that the company's related party transaction situation is continuing to improve. From 2018 to 2020, the base profit sharing ratios of the company's international retail and advertising business entrusted management agreements were 22% and 25%, respectively, and both included incremental profit sharing mechanisms; from 2021 to 2023, the base profit sharing ratios remained unchanged but the incremental profit sharing mechanisms were cancelled; from 2024 to 2026, the base profit sharing ratios under the original agreement were reduced to 20%, 22%, and the Supplementary Agreement further reduces them to 10%, 16%, and the bank expects the continuous improvement of the entrusted management fee rate to help reduce the company's costs. The report states that the commercial revenue of Capital Airport is still in need of improvement. In the first half of 2024, the company's international retail franchise revenue and advertising revenue were 2.59 billion yuan and 3.56 billion yuan respectively, which were 15% and 61% of the same period in 2019, while passenger traffic was 66% of the same period in 2019. The bank believes that compared to the aviation business, non-aviation business may face more pressure for recovery, especially duty-free business.