China Eastern Airlines Logistics accelerates earnings recovery, UBS maintains Buy and Rmb23.10 target price

Overview

This report summarizes UBS's key takeaways from China Eastern Airlines Logistics' 2025 earnings conference. The core conclusion is that the company's Q4 operations recovered significantly, dedicated freighter utilization and load factor were strong, and the dividend policy remained stable. Against the backdrop of Middle East disruptions, substitute demand from Asia Pacific to Europe, and tight dedicated freighter supply, air cargo freight rates remained elevated in the short term and are still supported in the medium to long term.

Core views

UBS maintains a Buy rating on China Eastern Airlines Logistics and a Rmb23.10 target price. The main reasons are: first, Q4 2025 revenue and net profit recovered year on year, indicating stronger earnings repair momentum; second, the company's dedicated freighter daily utilization hit a record high and load factor stayed industry leading; third, in the global air cargo supply-demand structure, Asia Pacific remains the main growth engine, while the Middle East conflict has disrupted capacity and boosted substitute demand on some routes; fourth, through the Chongqing western hub, Southeast Asia routes, high-value cargo, and improved digital capabilities, the company is well positioned to support volumes and efficiency.

Analysis framework

The report combines information from the company's earnings conference, IATA air cargo supply-demand data, the impact of geopolitical events on route capacity, fuel cost pass-through ability, the company's route and cargo mix upgrades, and a P/E valuation method to assess China Eastern Airlines Logistics' earnings recovery and valuation.

Methodology notes

• Valuation methodsP/E valuation method

  Using the price-to-earnings ratio to derive a target price

  UBS uses a P/E approach to value China Eastern Airlines Logistics, and on that basis maintains a Rmb23.10 target price and a Buy rating.

• Industry supply-demand analysisAir cargo supply-demand framework

  Interplay among demand, capacity, route disruptions, and freight rates

  The report uses global cargo demand, capacity supply, Asia Pacific growth, Middle East disruptions, and Shanghai export rate changes to assess air cargo pricing and the company's earnings sensitivity.

• Company operations analysisCapacity utilization and cargo mix analysis

  Dedicated freighter utilization, load factor, and high-value cargo

  The report focuses on the company's dedicated freighter daily utilization, load factor, the Chongqing western hub, Southeast Asia routes, cross-border e-commerce, pharmaceutical cold chain, and fresh-produce supply chains, and how they contribute to volume and margins.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China Eastern Airlines Logistics 601156.SS

  Covered company in the report

  Strengths

  High dedicated freighter utilization, industry-leading load factor, stable dividend policy, and opportunities to expand the Chongqing western hub and high-value cargo mix.

  Weaknesses

  Rising fuel costs will pressure margins, and global air cargo growth may slow during the 15th Five-Year Plan period.

  Comparison

  The company holds one of China's largest B777 order books and uses a mix of dedicated freighters, belly-hold capacity, and external capacity.

  Risks

  Geopolitical deterioration, macroeconomic slowdown, pandemics, rapid growth in freighter capacity from other operators, and a sharp rise in jet fuel prices.

• Air cargo industry

  Core industry backdrop

  Strengths

  Asia Pacific remains the main growth engine, Middle East disruptions create substitute route demand, and short-term freight rates are elevated.

  Weaknesses

  Global demand growth may slow, and changes in capacity supply and fuel prices can affect earnings stability.

  Comparison

  Asia Pacific growth in 2025 was faster than the global average, and Asia Pacific-Europe route capacity rose year on year in March 2026.

  Risks

  Route normalization leading to lower freight rates, weaker-than-expected trade growth, and geopolitical conflicts or policy restrictions affecting cross-border logistics.

Key data

• 2025 Q4 revenue/net profit growth+10% / +11% YoYRevenue and net profit recovered year on year, with a clear improvement from the prior quarter.
• 2025 dedicated freighter daily utilization13.09 hoursReached a record high; the company aims to raise it to 14-15 hours.
• Load factorAbove 70%Remained at an industry-leading level.
• Dividend payout ratio40%Management kept its 2024-2026 guidance of 30%-50% unchanged.
• 2025 global air cargo demand/capacity growth+4.2% / +5.1% YoYIATA data show global demand growth lagged capacity growth, but Asia Pacific remained the main growth engine.
• 2025 Asia Pacific air cargo growth+8.6% YoYAsia Pacific was the main structural source of growth.
• March 2026 change in global air cargo capacity-11.7% YoYThe Middle East conflict led to a decline in global air cargo capacity, with inbound/outbound capacity on Middle East routes down about 30%.
• March 2026 change in Asia Pacific-Europe route capacity+18.7% YoYRising substitute demand drove an increase in capacity on Asia Pacific to Europe routes.
• Shanghai export spot rate+28% from early March, +21% YoYAs of April 6, capacity contraction and higher oil prices kept freight rates elevated.
• Domestic jet fuel ex-factory price+74% MoM in AprilFuel costs rose sharply in the short term; the company can pass through about 35% of the incremental cost pressure through fuel surcharges, freight rate adjustments, and hedging.

Impact & implications

If dedicated freighter supply remains tight and Asia-Pacific cross-border cargo demand stays resilient, China Eastern Airlines Logistics' freight rates, freighter utilization, and share of high-value business should continue to support earnings recovery. Rising fuel costs will pressure margins, but the company has some cost pass-through ability. Over the medium to long term, the Chongqing western hub, Southeast Asia-Shanghai-Europe transit products, pharmaceutical cold chain, fresh-produce supply chains, AI pricing, and smart cargo terminal construction will shape the quality of the company's growth.

Risks

• Geopolitical deterioration.
• Macroeconomic slowdown.
• Pandemics or other sudden events affecting air cargo demand or operations.
• Rapid growth in freighter capacity from other operators, intensifying competition and pressuring freight rates and profitability.
• A sharp increase in jet fuel prices compressing margins.
• Weaker-than-expected international trade growth, cross-border e-commerce GMV, or demand for high-value cargo.

What to watch

• 2026 global and Asia-Pacific air cargo demand growth.
• The continued impact of Middle East developments on route capacity and substitute demand.
• Shanghai export freight rates and the trend in cross-border air cargo pricing.
• Changes in jet fuel prices and the pass-through effect of the company's fuel surcharges, freight rate adjustments, and hedging.
• The ramp-up progress of the Chongqing western hub and the effectiveness of Southeast Asia route densification.
• Growth in high-value cargo such as pharmaceutical cold chain, fresh-produce supply chains, and cross-border e-commerce.
• Whether dedicated freighter daily utilization can rise from about 13 hours to 14-15 hours.
• The contribution of digital projects such as AI pricing and smart cargo terminals to efficiency and margins.