Securities Investment: China Airlines information profitability Outlook optimistic

The China Civil Aviation Information Network (0696, referred to as AVIC information) is a leading supplier of information technology solutions for the mainland aviation industry, with a steady increase in its 08 turnover and a substantial increase in its operating expenses, and its net profit fell 11% to 560 million yuan Year-on-year. In the long run, the demand for the mainland aviation market is steadily increasing, so the company's long-term profit growth prospects are still optimistic. 　　The unit appears to be attractive in accordance with the adjusted target price of $5.00, which is equivalent to the expected overall and cash-deducted earnings ratio of 15.2 times and 9.6 times times respectively. The number of electronic travel distribution services in the company recorded a year-on-year increase of 3.3% to 211 million in 08, the slowest increase since the onset of the SARS outbreak in the first half of 2003. The number of mainland airlines has increased modestly, by 3.5% to 203 million, while the number of overseas airline bookings has decreased by 0.1% to 8.4 million. 　　Although China's civil Aviation Information Network in 08 to stabilize the turnover of 2 billion yuan level, but mainly because of the company's depreciation and payroll expenditure increased, the total operating expenses increased by 10%, so that its operating profit fell 20% to 522 million yuan, and operating profit margin is 26.1%. As the real tax rate in 08 was at a low level of 7%, the decrease in tax expenditure helped offset the decline in profits. 　　China Civil Aviation Information Network is recognized as a key software enterprise under the National Planning layout for the third consecutive year, so it can enjoy a concessionary profits tax rate of 10%, and the company has received a refund of RMB 30 million for the 07 year tax, which will also help to relieve the company's tax liabilities. 　　Sufficient funds to meet capital expenditure the Chinese civil Aviation Information network is still flush with cash at the end of 08, at RMB 3.12 billion (RMB 1.60 per share) to meet its planned capital expenditure of 1.2 billion yuan in 09, which is mainly used for the construction of new operating centres in Beijing and the development of new information technology systems. China Civil Aviation Information network in the first quarter of 09, the performance of the ideal, its electronic tourism distribution services in the number of processing in the quarter jumped 11% to 56.4 million. We expect the growth to continue throughout the year. Assuming that the actual tax rate is 15%, that is, the preferential rate available to High-tech companies after the central government implemented the general business enterprise unification rate in early 2008, we expect the 09-year pre-tax profit of the China Civil Aviation Information network to increase by 11% per cent and its earnings will be flat.