Improving international flights drove a slight 2Q26 earnings beat for Baiyun Airport, but surging T3 costs remain the key pressure

Overview

The report assesses Baiyun Airport’s 2Q26 results, passenger traffic recovery, cost changes following the commencement of T3 operations, and progress in its duty-free joint venture. An increase in international flights lifted the aeronautical charging rate above expectations and drove a slight earnings beat, but Goldman Sachs believes that rising usage fees, depreciation and amortization, and capital expenditures will continue to weigh on earnings, and therefore maintains its Sell rating.

Core views

Baiyun Airport announced its 2Q26 results after the market close on August 26, 2026, reporting net profit attributable to shareholders of Rmb259mn, down 43% YoY. As 2Q25 included a Rmb153mn one-off gain related to arbitration compensation for advertising contracts at T2 and the Ground Transportation Center, recurring net profit in 2Q26 was Rmb243mn after excluding one-off items, down 18% YoY. Despite the YoY earnings decline, the higher proportion of international flights drove a better-than-expected aeronautical charging rate per aircraft movement, resulting in quarterly earnings slightly above Goldman Sachs’ expectations. Passenger traffic continued to recover. Passenger throughput in 2Q26 was 20.8mn passengers, up 4.1% YoY. Domestic passenger traffic grew 0.7%, outperforming the industry’s 5% YoY decline despite elevated fuel surcharges. International and regional passenger traffic grew 17.0% YoY, maintaining strong momentum, which Goldman Sachs attributed to additional capacity and flights following T3’s opening in October 2025. Total passenger traffic grew 9.8% YoY in July 2026, also exceeding the industry growth rate of approximately 4%. The shift in the passenger traffic mix toward international flights is the primary basis for the higher aeronautical charging rate and improved near-term revenue performance. Rising costs remain the key issue emphasized in the report. Operating costs including depreciation and amortization were Rmb1,799mn in 2Q26, an increase of approximately Rmb340mn or 23% from 2Q25. The report primarily attributed the approximately Rmb341mn YoY increase in costs to T3 operations. Baiyun Airport currently pays Guangdong Airport Authority approximately Rmb74.9mn per month in T3 asset usage fees, totaling approximately Rmb225mn in 2Q26. Management stated that the current rate includes a discount because T3 is still in its ramp-up phase and will be readjusted after T3’s financial settlement is completed. Goldman Sachs expects usage fees to rise further as passenger traffic grows. Higher administrative expenses following the opening of the T3 Hilton hotel also increased costs. Terminal adjustments may create further depreciation and capital expenditure pressure. Baiyun Airport completed the relocation of all airlines from T1 to T3 in May 2026, after which T1 is scheduled for renovation and upgrades. Depreciation and amortization may increase after the project is completed. Goldman Sachs reiterated that the opening and upgrading of terminals will leave the company facing persistent headwinds from surging costs and capital expenditures, and that passenger traffic recovery will not necessarily translate into a proportional improvement in profits. Investment income from associates and joint ventures was a partial bright spot. Related investment income was Rmb58mn in 2Q26, an increase of Rmb17mn or 42% YoY. Of this, the Guangzhou Baiyun Airport duty-free joint venture, in which Baiyun Airport holds 49% and China Duty Free Group holds 51%, contributed Rmb17mn in income, compared with no income in 1H25 and a Rmb1.4mn loss in 2H25. The improvement mainly reflected the commencement of T2 outbound duty-free operations in March 2026 and the opening of the new T3 duty-free store in January 2026. Based on the increase in international flights, Goldman Sachs raised its 2026E-2028E assumptions for aeronautical charging rates per aircraft movement. At the same time, it slightly increased its 2027E-2028E cost assumptions to reflect potentially higher T3 usage fees. Following these two adjustments, the 2026E, 2027E, and 2028E net profit forecasts were revised by 20%, 7%, and -6%, respectively. The new 2026E-2028E revenue forecasts are Rmb8,541.7mn, Rmb9,055.5mn, and Rmb9,601.5mn, above the previous forecasts of Rmb8,361.2mn, Rmb8,883.5mn, and Rmb9,426.9mn. EPS forecasts for the same period were revised from Rmb0.27, Rmb0.31, and Rmb0.36 to Rmb0.33, Rmb0.34, and Rmb0.34. Cost pressure is expected to reduce the EBITDA margin from 37.2% in 2025 to 31.0% in 2026E and further to 28.9% in 2028E. The long-term investment view remains cautious. The report notes that Baiyun Airport was the third-largest airport in mainland China by international passenger throughput in 2019, accounting for 11% of national international passenger throughput. However, competition on international routes may intensify, while limited airport duty-free space may result in weaker profitability than peers. Regulation may reduce duty-free revenue-sharing rates, and downtown duty-free stores may also create competition. Although the stock’s valuation is below its mid-cycle level, Goldman Sachs believes fundamentals may weaken further and that the market has not yet fully priced in these pressures, and therefore maintains its Sell rating. Goldman Sachs rolled its valuation basis from year-end 2026 to year-end 2027 but nevertheless lowered its target price from Rmb7.2 to Rmb7.0. The target price is based on a DCF valuation using a WACC of 8.7% and a perpetual growth rate of 2.0%, implying 8.5% downside from the report’s reference price of Rmb7.65.

Analysis framework

Goldman Sachs first excluded one-off items such as arbitration compensation in the prior-year period to assess underlying operating changes based on recurring profit. It then broke down performance into passenger traffic, the international flight mix, aeronautical charging rates per aircraft movement, T3 usage fees, and other operating costs, while analyzing the incremental contribution from the duty-free joint venture. On this basis, it revised its 2026E-2028E revenue, cost, and net profit forecasts, then rolled the valuation date to year-end 2027 and calculated the 12-month target price using a DCF framework.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  DCF Valuation

  The report discounts Baiyun Airport’s future cash flows to present value, using a WACC of 8.7% and a perpetual growth rate of 2.0% to derive a 12-month target price of Rmb7.0 per share.

• Corporate Fundamentals and Financial FrameworkEarnings Quality Analysis

  Recurring Profit Excluding One-Off Items

  The report excludes one-off factors such as arbitration compensation in 2Q25 and uses the 18% YoY decline in recurring net profit in 2Q26 as the primary measure of core operating performance.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Breakdown of Passenger Traffic, Flight Mix, and Charging Rate per Aircraft Movement

  The report separately examines passenger throughput, the proportion of international flights, and the aeronautical charging rate per aircraft movement to explain the revenue improvement, while treating T3 usage fees and other operating expenses as cost-side variables.

Asset mapping & comparison

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

• Guangzhou Baiyun International Airport Co., Ltd. (600004.SS)

  Growth in international passenger traffic and improvement in the duty-free joint venture provide positive contributions, but T3 operations, T1 upgrades, and higher usage fees pressure profits and cash investment.

  Strengths

  International and regional passenger traffic grew 17.0% YoY in 2Q26, while domestic passenger traffic outperformed the industry; the duty-free joint venture began contributing income.

  Weaknesses

  Operating costs grew 23% YoY, and T3 usage fees may continue to rise; limited airport duty-free space may constrain profitability relative to peers.

  Comparison

  It was the third-largest airport in mainland China by international passenger throughput in 2019, accounting for 11% of national international passenger throughput; domestic passenger traffic grew 0.7% in 2Q26, outperforming the industry’s 5% decline.

  Risks

  Competition on international routes, lower duty-free revenue-sharing rates, competition from downtown duty-free stores, and continued increases in terminal usage fees, depreciation, and capital expenditures.

Key data

• 2Q26 Net Profit Attributable to ShareholdersRmb259mnDown 43% YoY
• 2Q26 Recurring Net ProfitRmb243mnDown 18% YoY after excluding one-off items
• 2Q25 Arbitration CompensationRmb153mnOne-off gain related to advertising contracts at T2 and the Ground Transportation Center
• 2Q26 Passenger Throughput20.8mn passengersUp 4.1% YoY
• 2Q26 Domestic Passenger Traffic Growth+0.7% YoYThe industry recorded -5% YoY during the same period
• 2Q26 International and Regional Passenger Traffic Growth+17.0% YoYDriven by the opening of T3 and an increase in international flights
• July 2026 Total Passenger Traffic Growth+9.8% YoYThe industry growth rate was approximately +4% YoY during the same period
• 2Q26 Operating CostsRmb1,799mnIncluding depreciation and amortization, up approximately Rmb340mn or 23% YoY
• T3 Usage FeesRmb74.9mn/monthApproximately Rmb225mn was paid in 2Q26; fees may rise following settlement and as passenger traffic ramps up
• 2Q26 Investment Income from Associates and Joint VenturesRmb58mnUp Rmb17mn or 42% YoY
• 2Q26 Income from Duty-Free Joint VentureRmb17mnBaiyun Airport holds 49%, while China Duty Free Group holds 51%
• 2026E-2028E Net Profit Forecast Revisions+20% / +7% / -6%Higher aeronautical charging rate assumptions while incorporating higher T3 usage fees
• New 2026E-2028E EPS ForecastsRmb0.33 / Rmb0.34 / Rmb0.34Previous forecasts were Rmb0.27 / Rmb0.31 / Rmb0.36
• 2026E-2028E Revenue ForecastsRmb8,541.7mn / Rmb9,055.5mn / Rmb9,601.5mnPrevious forecasts were Rmb8,361.2mn / Rmb8,883.5mn / Rmb9,426.9mn
• EBITDA Margin31.0% / 29.8% / 28.9%Corresponding to 2026E, 2027E, and 2028E, respectively, versus 37.2% in 2025
• 2026E-2028E P/E23.5x / 22.8x / 22.3xBased on the report’s forecasts and pricing basis
• DCF ParametersWACC 8.7%; perpetual growth rate 2.0%Used to calculate the 12-month target price
• Target Price and Reference PriceRmb7.00 / Rmb7.65Target price lowered from Rmb7.20, implying 8.5% downside

Impact & implications

The report believes that the recovery in international and regional passenger traffic and improved charging rates can increase revenue, but T3 usage fees, hotel management expenses, depreciation and amortization following the T1 renovation, and capital expenditures will weaken operating leverage. Consequently, although near-term earnings forecasts improved due to higher charging rates, the 2028E forecast was lowered due to higher cost assumptions, while the EBITDA margin is also expected to continue narrowing. Goldman Sachs therefore believes that valuation below the mid-cycle level is insufficient to offset the risk of weakening fundamentals.

Risks

• After T3’s financial settlement is completed, the currently discounted usage fee may be raised and may continue to increase as passenger traffic ramps up.
• Depreciation and amortization and capital expenditures may rise further after the T1 renovation and upgrade are completed.
• Competition on international routes may intensify, while limited airport duty-free space may constrain profitability relative to peers.
• Regulatory changes may reduce duty-free revenue-sharing rates, while downtown duty-free stores may also create competition.
• Relative to the Sell thesis, a stronger-than-expected recovery in travel demand represents an upside risk.
• Higher-than-expected duty-free revenue-sharing rates or passenger traffic diversion also represent upside risks to the target price.

What to watch

• Monitor the magnitude of usage fee adjustments after T3’s financial settlement is completed and their relationship with passenger traffic growth.
• Monitor whether international and regional passenger traffic, the flight mix, and the aeronautical charging rate per aircraft movement can continue to improve.
• Monitor the progress of the T1 renovation and upgrade, as well as incremental depreciation and amortization and capital expenditures after completion.
• Monitor changes in T2 outbound duty-free operations, the new T3 duty-free store, and duty-free revenue-sharing rates.