Investment Rating - The investment rating for Bohai Leasing is "Buy" with a target price of 4.29 CNY, maintaining the current rating [5]. Core Views - Bohai Leasing reported a revenue of 40.284 billion CNY for the first three quarters of 2025, a year-on-year increase of 60.58%. However, the net profit attributable to shareholders was -1.372 billion CNY, a decrease of 186.31% year-on-year, primarily due to goodwill impairment [1]. - The company’s revenue growth is driven by increased aircraft sales and leasing income, while the net profit decline is significantly impacted by goodwill impairment. Excluding this impairment, the net profit for the first three quarters would be 1.904 billion CNY, reflecting a year-on-year growth of 19.75% [1]. - The global demand for air passenger transport remains strong, and the aircraft market value, leasing rates, and renewal rates are expected to stay high due to limited production capacity from manufacturers [2]. Summary by Sections Financial Performance - For Q3 2025, Bohai Leasing achieved a revenue of 11.824 billion CNY, up 32.73% year-on-year, with a net profit of 646 million CNY, down 26.03% year-on-year [1]. - The projected revenues for 2025-2027 are 53.404 billion CNY, 33.728 billion CNY, and 35.983 billion CNY, with year-on-year growth rates of 38.96%, -36.84%, and 6.69% respectively [3][4]. Market Position and Outlook - Avolon, a key player in the aircraft leasing market, has a fleet of 1,159 aircraft, with 99% of the aircraft scheduled for delivery in the next two years already leased out. The demand for aircraft remains robust, with backlogs at historical highs [2]. - The aircraft leasing industry is expected to benefit from the ongoing supply-demand imbalance, with limited availability of aircraft for leasing in the coming years [2]. Valuation Metrics - The projected net profit for 2025 is 135 million CNY, with a significant rebound expected in 2026 and 2027, reaching 1.485 billion CNY and 2.134 billion CNY respectively [3][4]. - The price-to-book (PB) ratios for 2025, 2026, and 2027 are projected to be 0.74x, 0.70x, and 0.66x respectively, indicating a potential for valuation improvement [3][4].

Investment Rating - Industry rating: Outperforming the market [1] Core Insights - Aircraft manufacturers are slowly recovering capacity, but the number of grounded aircraft remains high. Supply chain and labor shortages continue to impact production, leading to delivery delays. From January to July 2025, Boeing and Airbus delivered only 701 aircraft, with a monthly average of about 100 aircraft, which is 74.6% of the peak monthly delivery of 134 aircraft in 2018. Meanwhile, aircraft order demand remains strong, with backlogged orders at historical highs [2][4][6]. - Global aviation market demand continues to grow, with the global passenger load factor reaching a new high for the year. The global air passenger volume is on the rise, with all regions showing growth in revenue passenger kilometers (RPK). The Latin America region leads with a 7.2% year-on-year increase, followed by Asia-Pacific and the Middle East with increases of 5.5% and 5.4%, respectively. International routes are performing strongly, particularly in the Asia-Pacific and Latin America regions [2][13][17]. - Overall, while aircraft manufacturers' capacity is recovering, it still struggles to meet the ongoing expansion in aircraft demand. Aircraft leasing companies are seeing high demand for orders, with limited available slots in the coming two years. The Asia-Pacific aviation market has significant growth potential, providing broader development space for Chinese aircraft leasing companies. Compared to global leasing leader AerCap, Chinese leasing companies are currently undervalued and have higher order elasticity, making them worthy of attention [2][6][38]. Summary by Sections 1. Aircraft Supply Continues to Tighten - Boeing's average monthly delivery has significantly improved compared to last year, while Airbus's monthly delivery is slightly below last year's level. As of the end of July 2025, Boeing delivered 328 aircraft and Airbus delivered 373 aircraft, with average monthly deliveries of approximately 47 and 53 aircraft, respectively [5]. - The backlog of aircraft orders remains at historical highs, with Boeing and Airbus accumulating new orders of 699 and 501 aircraft, respectively, this year. As of July 2025, the total backlog was 15,262 aircraft [6]. 2. Civil Aviation Passenger Demand Update - Global air passenger volume (RPK) increased by 4.0% year-on-year in July 2025, with global capacity (ASK) increasing by 4.4%. The global passenger load factor reached 85.5% [13][17]. - All regions experienced growth in air passenger volume, with the domestic market in China showing steady performance, with a year-on-year increase of 3.8% in passenger volume [23][24]. 3. Aircraft Leasing Company Dynamics - The average remaining lease term for China’s leasing companies is relatively long, with China Aircraft Leasing Company showing significant improvement in fleet age to 6.3 years. The average remaining lease term for China’s leasing companies is 7.9 years, ensuring long-term stability for their contracts [38][43]. - Aircraft rental prices are rising, leading to improved rental yield for leasing companies. China’s leasing companies maintain rental yields above 10%, with financing costs relatively low for China’s leasing companies at 4.5% [44].