BOC AVIATION(2588.HK)：REPORTED DECENT GROWTH IN 1H25 CORE EARNINGS

Core Viewpoint - BOC Aviation (BOCA) reported strong financial results for 1H25, with total revenue and other income increasing by 5.8% YoY to US$1,242 million, despite a significant drop in net profit due to the absence of non-recurring income from the previous year [1][2]. Financial Performance - Net profit decreased by 25.8% YoY to US$341.5 million in 1H25, primarily due to the lack of non-recurring income, which included US$175 million of write-backs related to aircraft in Russia in 1H24 [2]. - Excluding the impact of the Russia event, core net profit after tax increased by 20% YoY in 1H25 [2]. - Finance expenses rose by 2.3% YoY, with the cost of debt stabilizing at 4.6% in 1H25, unchanged from 1H24 [2]. - An interim dividend of US$0.1476 per share was declared in 1H25 [2]. Market and Operational Insights - The market values of aircraft exceeded net book value by 15% at the end of June 2025, which is favorable for BOCA's operating leased fleet [3]. - Lease rental yield increased to 10.3% in 1H25 from 9.8% in 1H24, while net lease yield rose to 7.5% from 7.0% in the same period [3]. - Core lease rental income increased by 24% YoY to US$276 million in 1H25 [3]. - Interest income from finance leases surged by 35.6% YoY to US$130.2 million, accounting for 10.5% of total revenues and other income [4]. - Net gain on the sale of aircraft increased by 8% YoY to US$60.3 million in 1H25 [4]. Fleet Utilization and Valuation - Owned aircraft utilization reached 100% at the end of June 2025, consistent with previous quarters [5]. - The average fleet age was reported at 5.0 years, with an average remaining lease term of 7.9 years [5]. - BOCA is positioned as a geared beneficiary of steady growth in the global airline industry, with a projected dividend yield of approximately 3.9% in 2025 [6]. - The target price for BOCA was increased from HK$83.84 to HK$83.9, based on a 1.1x 2025E P/B ratio [6].