22 October 2016
Shanghai Disneyland is expected to open in spring next year. Photo: Baidu
Shanghai Disneyland is expected to open in spring next year. Photo: Baidu

Shanghai airport operator to benefit from Disneyland launch

Foreign investors have not encountered any significant inconvenience in buying mainland A shares after Shanghai-Hong Kong Stock Connect kicked off on Nov. 17.

However, global investors have been unable to buy shares of Shanghai International Airport (600009.CN) through the stock linkage since Tuesday, when foreign shareholdings in the company exceeded regulatory requirements for the first time.

Passenger turnover at the airport is expected to maintain a high growth rate this year, and the opening of the Disneyland amusement park will also boost traffic to the city.

Shanghai International Airport was approved by the city government in May 1995 and is responsible for managing Hongqiao airport in the west and Pudong airport in the east.

The firm has two strategic goals, promoting Shanghai as an airport hub and building up a modern corporate system.

In the first quarter, revenue rose 11.88 percent year on year to 1.522 billion yuan (HK$250 million).

Profit attributable to the company’s owners jumped 23.13 percent to 627 million yuan from the same period a year earlier.

Net profit climbed 15.19 percent year on year to 587 million yuan.

The company’s quarterly earnings beat market expectations, as the demand for air travel has expanded faster than expected in Shanghai and mainland China as a whole.

The number of passengers grew strongly in April, and aircraft movements increased 14.5 percent year on year.

Domestic flights grew 18.1 percent, and international flights grew 13.5 percent, far exceeding the growth rates in the same period a year earlier.

Passenger turnover jumped 20 percent from the year before. The growth rate far exceeded those of other major listed airport companies.

At the end of last year, the airport capacity utilization rate reached 66 percent.

UBS expects the utilization rate to have increased during the peak period of early April, along with more aircraft movements per hour.

It expects passenger turnover to rise more than 20 percent in the second quarter, which would continue to underpin sales revenue.

The opening of Shanghai’s Disney flagship store and the upcoming Disneyland park early next year will further drive up the number of travelers to Shanghai from across the country.

That is likely to benefit the transport, hotel and tourism sectors as well as local airports, Guotai Junan Securities said.

UBS gives the stock a “buy” rating, with a target price of 31.9 yuan based on a price-to-book ratio of 2.7 in 2016.

This article appeared in the Hong Kong Economic Journal on May 20.

Translation by Julie Zhu

[Chinese version中文版]

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A conceptual illustration of the theme park. Photo: Baidu

The construction of the theme park remains on schedule. Photo: Baidu

Disneyland is likely to increase traffic to Shanghai Pudong International Airport. Photo: Baidu

Department of Investment Analysis at HKEJ

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