[Zhenzhuo HK Stock Experts] Meilan Airport, as the core hub of Hainan Free Trade Port, has bright future development prospects (00357.HK)

For the six months ended June 30, 2025, the group's $Meilan Airport (HK|00357)$ total revenue was RMB 1,079,263,016, a decrease of 6.09% compared to the same period in 2024; the net loss after tax was RMB 62,307,669 (same period in 2024: net loss of RMB 256,552,623); the net loss attributable to shareholders was RMB 70,202,444 (same period in 2024: net loss attributable to shareholders of RMB 248,045,330). The reduction in net loss was mainly due to the provision for compensation related to an arbitration case ("Arbitration Case") in the same period of 2024. Excluding the impact of the Arbitration Case, the group's net loss for the first half of 2025 increased by RMB 78,555,038 compared to the same period last year, primarily due to: (1) a decline in Meilan Airport's operational indicators, with aircraft movements and passenger volume decreasing by 3.43% and 4.05% year-on-year, respectively, leading to a year-on-year decrease of RMB 28,033,365 in aeronautical revenue; and (2) a year-on-year decrease of RMB 41,980,874 in non-aeronautical revenue due to factors such as weakened consumer spending sentiment.

Mr. Pan Tieshan, Vice Chairman of the Hong Kong Society of Financial Analysts, stated that in early 2025, the State Council of China announced that the Hainan Free Trade Port ("Hainan FTP") would officially commence its closed-loop operation on December 18, 2025, implementing a regulatory model of "frontline liberalization, second-tier control, and free flow within the island." "Frontline liberalization" refers to treating Hainan and other countries/regions outside China as the "frontline," implementing a series of free and convenient entry and exit measures to facilitate smoother connectivity between Hainan and the world; "second-tier control" involves precise management of goods flow between Hainan and mainland China; while "free flow within the island" ensures relatively free circulation of various factors within Hainan Province. After the closed-loop operation of the Hainan FTP, enterprises will enjoy new policy benefits, including significantly expanded "zero-tariff" product coverage, with the scope of eligible entities basically covering all enterprises, institutions, and non-enterprise units in Hainan with actual import needs; for overseas personnel, restrictions on free entry and exit will be further relaxed.

It is reported that for the six months ended June 30, 2025, the province received a total of 55.2129 million domestic and international tourists, an increase of 8.1% year-on-year, with total tourism revenue reaching approximately RMB 118.927 billion, up 8.4% year-on-year. Hainan's tourism market demonstrated strong growth momentum during major holidays, attracting numerous visitors and steadily increasing tourism consumption. During the Labor Day holiday, Hainan received 3.8876 million tourists, a year-on-year increase of 17.0%, with total tourist spending reaching RMB 5.245 billion, up 20.2% year-on-year. During the Dragon Boat Festival holiday, Hainan received 1.8551 million tourists, a year-on-year increase of 16.3%, with total tourist spending reaching RMB 1.873 billion, up 12.8% year-on-year.

In addition, in the second half of 2025, the group stated that it will seize the opportunity of the Hainan FTP's closed-loop operation to fully build an aviation regional hub facing the "two oceans." Focusing on its core business, the group will optimize its route network layout, expand the passenger and cargo aviation markets, cultivate new profit growth points, and advance safety and ecological construction. At the same time, it will strengthen its foundation, closely monitor the progress of key projects, enhance international transfer capabilities, optimize strategic planning, and strengthen external cooperation. In terms of operational services, efforts will be made to improve service quality and operational efficiency while enhancing employee care. In management, the group will promote cost reduction and efficiency improvement, strengthen talent reserves and digitalization, and drive high-quality development through a series of measures to support the construction of the Hainan FTP.

Overall, as the core hub of the Hainan FTP, Meilan Airport's locational advantages will become more prominent in 2025 as the island's closed-loop operation progresses, with passenger volume expected to continue climbing, further driving growth in aviation business revenue. Additionally, in February 2025, Meilan Airport's "second-tier port" successfully passed national acceptance, marking a further strengthening of its important role and functions in the construction of the Hainan FTP, which is expected to attract more international and domestic resources and business, opening up new revenue growth points. Meilan Airport is expected to achieve a turnaround in performance and enter a new growth phase in 2025, supported by the recovery of its aviation business, diversified non-aviation business, optimized cost control, and the release of policy benefits from the Hainan FTP. Mr. Pan Tieshan, Vice Chairman of the Hong Kong Society of Financial Analysts, believes that buying at the current price could be considered, with a target of HK$12 and a stop-loss at HK$9.95.