Our target price is HK$3.61, set at 1.4x 2026E P/BV in relation to average 2026-27E 13.5% core ROE, in-line with the historical trading relationship.

Key downside risks that could prevent the CEA H-share from achieving our target price include: 1) increases in fuel prices; 2) worse-than-expected yield management; 3) larger-than-expected RMB depreciation; 4) higher-than-expected unit cost with lower-than-expected aircraft utilization rate; and 5) worse-than-expected air traffic diversion to high-speed rail.