Air China Ltd Class A

601111: XSHG (CHN)

Morningstar Rating for Stocks	Fair Value	Economic Moat	Capital Allocation
	¥8.13	Hvsmr	Svbjwtdy

Air China: Proposed Private Placement Is Positive

Cheng Wang

Dec 26, 2023

We view Air China’s proposed private placement of new A- and H-shares positively. Based on our estimate, the implied average issuance price will be about 8% above our current fair value estimate. Therefore, we think the placement is value-accretive. The up to CNY 6 billion and HKD 2 billion raised should help Air China manage its strained balance sheet while meeting capital expenditure needs. We keep our fair value estimates at HKD 6.40 per H-share and CNY 5.90 per A-share. Air China’s H-share price is 27% below our fair value estimate, but we prefer Cathay Pacific presently. We think Cathay is less exposed to slowing business travel in China and a depreciating Chinese yuan.

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