BOC AVIATION(HK:02588) GF SECURITIES·2024-08-18 09:08Investment Rating - The report assigns a "Buy" rating to the company, with a target price of 85 HKD per share based on a reasonable valuation of 1.2x P/B [3][36]. Core Insights - The company reported a total operating and other income of 1.174 billion USD for the first half of 2024, representing an 11% year-over-year increase. Net profit reached 460 million USD, a 76% increase compared to 262 million USD in the first half of 2023. Excluding impairment impacts, core net profit grew by 10% [1][7]. - The asset side shows a stable expansion driven by financing leases and aircraft sales. The company delivered 18 new aircraft in the first half of 2024, up from 16 in the same period of 2023, with a utilization rate of 99% for owned aircraft. However, operating lease income decreased by 1.3% year-over-year, primarily due to a higher number of aircraft sold compared to those introduced into operating leases [1][8][9]. - On the liability side, the company's cost of funds (COF) continued to rise, with financial expenses increasing by 20.6% to 358 million USD in the first half of 2024. The annual interest rate rose from 3.9% in the first half of 2023 to 4.6% in the first half of 2024. A potential interest rate cut by the Federal Reserve could alleviate the profit pressure from liabilities [1][20]. Summary by Sections Financial Performance - The company achieved a net profit of 460 million USD in the first half of 2024, a significant increase from 262 million USD in the same period of 2023. Earnings per share rose to 0.66 USD, up from 0.38 USD year-over-year [1][7]. - The total assets increased by 6% year-over-year to 24.3 billion USD, with the total book value of aircraft at 21.8 billion USD, reflecting an 8% increase compared to 20.2 billion USD in the first half of 2023 [8]. Asset Management - The company sold 15 aircraft in the first half of 2024, a substantial increase from 3 aircraft sold in the same period of 2023. The average age of sold aircraft was 10 years [1][18][19]. - Financing lease receivables reached 3 billion USD, an 87% increase compared to 870 million USD in the first half of 2023, contributing significantly to revenue growth [1][16]. Profitability Forecast - The company expects core net profit to reach 840 million USD in 2025, driven by anticipated interest rate cuts and declining costs. The projected net profit for 2025 is 840 million USD [1][36].