Cathay Pacific 1Q15 net profit pegged at HKD620m

Estimation based on Air China's 1Q15 result.

It has been noted that Air China’s 1Q15 result (under PRC accounting standards) discloses income from associates and joint ventures.

According to a research note from HSBC Global Research, this line item includes Air China’s 29.99% share of Cathay Pacific’s 1Q15 net profit (excluding Cathay’s 20% share of Air China’s profit) plus other airlines and aviation businesses, but with no breakdown provided.

The report noted that it can use the disclosure at Air China, and the result releases and HSBC estimates for the other of Air China’s associates to estimate Cathay Pacific’s net profit in 1Q15.

HSBC Global Research said that it estimates Cathay’s 1Q15 net profit was HKD620m based on this approach. In 1Q14, using the same method, it estimates that Cathay Pacific was operating at slightly below break-even level.

Here's more from HSBC Global Research:

Implications? HSBC’s 2015e net profit forecast for Cathay Pacific is HKD7.1bn and over the last 10 years, Cathay has generated on average 30% of full year profits in the first half of each year.

Cathay’s 2Q profit tends to exceed 1Q and this plus the average seasonal earnings profile of the last decade implies 2015e net profit of above HKD5bn.

Clearly there are a large number of broad brushed estimates included above – so our takeaway from Air China’s result is that it probably supports a 2015e profit level of, but not exceeding HSBC’s forecast, which is 17% ahead of consensus.