Investment Summary：

• Soar of 18% in the Earnings of the First 3 Quarters
• The exchange earnings and investment income contribute to the growth of profit
• The introduction of ASK is faster than its peers
• The pioneer implementing SOE mixed reform in civil aviation

Soar of 66% in Q1 Earnings

China Eastern Airlines (CEA) recently released the Q1 report in the 2016 fiscal year. During the period, the total revenues increased by 5% over last year to RMB23.53 billion. The attributable net profit soared by 66.4% over last year to RMB2.6 billion, and EPS stood at RMB0.2. Downturn in oil prices, favorable RMB exchange rate and steady growth in demand contributed to the remarkable Q1 result.

Investment Thesis

We expect the company’s 2017/2018 net profit to be RMB6.5/6.7 billion, equivalent to EPS of RMB0.45/0.47.

Given that possible improvement on efficiency after the mix reform, and the expected better ticket price in the future, we are optimistic about the Company’s future result flexibility. Therefore, we keep the target price unchanged at HK$6.36, equivalent to 11.7X/11.1X estimated P/E in 2017/2018. Also, the “Accumulate” rating is given.