BOC AVIATION(HK:02588) Mai Gao Zheng Quan·2025-09-17 12:50Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 91.70 based on a projected PB of 1.20x for 2025 [5][3]. Core Views - The aircraft leasing industry is experiencing upward momentum due to a supply-demand gap driving aircraft values and rental rates higher, with sustained strong demand for leasing [1][2]. - The company has a strong fleet management capability, with a management team that has extensive experience in banking, leasing, and aviation, allowing it to effectively navigate cyclical risks in the aviation industry [1][2]. - The company benefits from a significant cost advantage in financing due to its backing by the Bank of China, maintaining a high credit rating and lower bond yield spreads compared to peers [2]. Summary by Sections Supply-Demand Dynamics - Aircraft manufacturers are facing production capacity constraints due to supply chain issues, skilled labor shortages, and material supply disruptions, leading to longer delivery times and a tight supply situation [13][14]. - Global air passenger demand continues to grow, with strong load factors reported, indicating robust market conditions for aircraft leasing [19][21]. - The limited availability of aircraft for leasing is driving up market values and rental rates, with new aircraft rental rates surpassing pre-pandemic levels [24][31]. Company Strengths - The company has maintained profitability for 31 consecutive years since its establishment, demonstrating resilience and strong operational capabilities [40]. - The management team has an average of over 26 years of experience, which is crucial for navigating the cyclical nature of the aircraft leasing industry [47][48]. - The fleet has been steadily expanding, with a focus on mainstream aircraft types, and the company has a significant order backlog, ensuring future growth [55][60]. Financial Performance and Projections - The company is projected to achieve revenues of USD 2.533 billion in 2025, with a slight decline of 0.9% year-on-year, followed by growth in subsequent years [4][3]. - Net profit is expected to be USD 699 million in 2025, reflecting a decrease of 24.31% year-on-year, but with a recovery anticipated in the following years [4][3]. - The company’s financing costs are expected to improve due to a significant portion of its debt being floating rate, which may benefit from potential interest rate cuts by the Federal Reserve [2][3].