Cathay Pacific Reports In-Line 2023 Results; Maintain FVE at HKD 8.90

No-moat Cathay Pacific’s full-year losses of HKD 7.2 billion translate into HKD 1.9 billion losses in the second half of 2022, in line with our expectation. The significant sequential improvement was driven by higher passenger revenue, which jumped six times to HKD 12.2 billion in the second half from merely HKD 2.1 billion in the first half. The strong rebound is set to continue in 2023 as Cathay embraces the postpandemic world. We marginally increase our 2023 earnings estimate to HKD 6.7 billion from HKD 6.4 billion. Our fair value estimate remains HKD 8.90. The shares closed with 12% discount to our fair value estimate as of March 8. Given the high uncertainty inherent in airlines, we would prefer a higher margin of safety before buying.