BEIJING, Aug. 11, 2009 (Xinhua News Agency) -- Orient Securities has rated China Eastern Airlines (CEA.NYSE; 00670.HK; 600115.SH) at 'neutral" upon the interim report the airlines released Monday evening.
China Eastern Airlines Corporation Limited, one of the country's three major carriers, said its first-half net profit surged to 1.174 billion yuan (172.6 million U.S.dollars), under Chinese accounting standards.
Revenue of the company in the first half, however, fell 15.83 percent to 17.5 billion yuan, as weakened demand following the global financial crisis continued to impact the world's carriers.
China Eastern received 1.176 billion yuan in non-operating income, mainly government subsidies and reimbursement from the civil aviation infrastructure fund, in the first six months, which consists a major part in its profit in the period.
Aside from the non-operating income, the profit on the changes in fair value, totaling 2.811 billion yuan, which is mainly from the jet fuel hedging contracts, is the other major profit source for China Eastern in the first half.
Orient Securities pointed out that after deducting the non-operating income and changes on fair value, the aviation business of China Eastern posted loss of 2.773 billion yuan in the first half. Its loss per share marked at 0.56 yuan in the period.
The securities dealer therefore deemed that the foundation of China Eastern's business performance in the first half is not solid. The profit on the changes in fair value also means that the cash expenditure on its jet fuel oil will increase in the future upon the rise of oil price.
Orient Securities expects the profitability of China Eastern to have a breakthrough in the future. But in light of its current operational situation, it still maintained the 'neutral' rating for the airlines.
China Eastern's A-share ended at 6.15 yuan Tuesday, up 2.50 percent. It outperformed the benchmark Shanghai Composite Index, which saw a slight rise of 0.46 percent on the day after five days' drop, to close at 3,264.73 points.
