CICC: Maintains outperform rating for TRAVELSKY TECH with a target price of HKD 13

According to the Zhitong Finance APP, China International Capital Corporation (CICC) released a research report stating that it maintains the profit forecasts for China Civil Aviation Information Network (00696) at RMB 2.327 billion and RMB 2.581 billion for 2025 and 2026, respectively. The current stock price corresponds to a price-to-earnings ratio of 13.6 times for 2025 and 12.1 times for 2026. It maintains an outperform rating and a target price of HKD 13 (corresponding to 15 times the 2025 price-to-earnings ratio and 13 times the 2026 price-to-earnings ratio), which has an upside potential of 10.2% compared to the current stock price. The company's revenue for 1H25 was RMB 3.895 billion, a year-on-year decline of 3.6%; the net profit attributable to the parent company was RMB 1.448 billion, a year-on-year increase of 5.9%, in line with market expectations. CICC's main points are as follows: AIT business volume performance is stable; system integration business drags down revenue growth In 1H25, the company's AIT business revenue grew by 2.1% year-on-year, and the total number of bookings increased by 5.3% year-on-year. According to the company's operational data announcement, in 1H25, the processing volume of Chinese airlines increased by 5.5% year-on-year; however, the processing volume of foreign and regional airlines declined by 7.8%, recovering relatively slowly. The revenue from the system integration business decreased by 38.5% year-on-year, dragging down the overall revenue growth of the company, mainly due to the impact of project construction progress. In 1H25, the revenue from settlement services, data networks, technical support, and products increased by 12.4%, decreased by 12.4%, and increased by 30.4%, respectively. Operating costs decreased year-on-year; collection situation improved In 1H25, the company's operating costs decreased by 4.2% year-on-year, mainly benefiting from: 1) the depreciation and amortization costs decreased by 17.6% year-on-year due to the completion of depreciation of certain fixed and intangible assets; 2) the sales costs of integration business decreased by 52.1% year-on-year due to the impact of project construction progress. In addition, in 1H25, the company recognized a net reversal of credit impairment losses of RMB 177 million (compared to RMB 66 million in 1H24), mainly due to improved customer collections and a decrease in the bad debt balance of accounts receivable. It is recommended to pay attention to the operational trends of the joint venture, China Aviation Information Technology Co., Ltd. ("TravelSky") According to the company's 2024 annual report, as of the end of 2024, the company held a 20.66% stake in China Aviation Information Technology Co., Ltd. According to the China Civil Aviation Network, the TravelSky app officially launched the "Civil Aviation Official Direct Sales Platform" feature in July, allowing users to compare and purchase direct tickets from multiple airlines on a single interface; as the platform provider, TravelSky does not charge ticket agency fees. The bank recommends continuing to pay attention to recent changes in user activity on TravelSky and its potential impact on commercialization. Risk Warning: Civil aviation demand may fall short of expectations; cost growth may exceed expectations; significant impairment provisions may be required