The "two-wheel drive" business model has been further enhanced. Bank of China Leasing is committed to gradually optimize its business structure, from an integrated leasing service provider to a "two-wheel" business model. "two wheels" refers to aircraft leasing business and infrastructure leasing business. We expect revenue from these two businesses to grow by 15.0% and 3.7% year-on-year to RMB 5.44 billion and RMB 3.55 billion respectively in 2016. Revenue from "double wheels" is expected to account for 85.4% of the company's total revenue in 2016, and this proportion is expected to rise to 92.0% in 2017.

Risk control is the primary task of financial leasing business. Due to the limited experience and low asset quality of small and medium-sized enterprises, the non-performing assets leased by the Bank of China are mainly concentrated in ship, commercial vehicle and construction machinery leasing and other leasing business sectors. We estimate that by the end of 2016, the company's rate of non-performing assets will fall by 0.22 percentage points year-on-year to 1.99%. The decline in the rate of non-performing assets is mainly due to the strengthening of risk control and the write-off of non-performing assets. For financial leasing business, we believe that in the macro-economic downturn, risk control is far more important than scale expansion. Lower risk will correspondingly lower yields, and we expect the company's net interest margin and net interest yield to be 2.17% and 2.56% respectively in 2016, down 0.04 and 0.05 percentage points year-on-year, and further to 2.10% and 2.51% in 2017. This year and next, according to our forecast, the revenue from financial leasing business will fall by 9.4% and 2.4% respectively to 5.43 billion yuan and 5.3 billion yuan respectively.

The profitability of aircraft leasing business has improved. In 2016 and 2017, we expect revenue from the aircraft leasing business to grow by 15.0% and 24.1% year-on-year to RMB 5.44 billion and RMB 6.75 billion, respectively, mainly due to newly delivered aircraft and increased profitability. Operating leasing business is the main body of income contribution. The new aircraft delivery comes mainly from direct orders, with 21 Boeing Co and Airbus aircraft expected to be delivered in 2016 and 2017 respectively. We expect the company's net rental return to reach 8.81% in 2016 and 9.01% in 2017. The RMB is under pressure to depreciate, and the company's aircraft leasing business is settled in US dollars, which will benefit.

Maintain a "buy" rating. Due to the proper control of interest expenses and impairment losses by Bank of China Leasing, we revised upward 4.2%, 1.8% and 2.1% of the company's net profit forecast from 2016 to 2018. The company's business performance is normal, but share turnover is not active, with an average turnover of only HK $9.02 million over the past three months and only 5.9 per cent of freely tradable shares. The company's current share price is equal to 0.95 times the 2017 forecast price-to-book ratio, which is relatively lower than the peer valuation. We give the company a target price of 2.40 yuan, which is equivalent to 1.18 times the forecast price-to-book ratio for 2017, and is also the average forecast price-to-book ratio for the industry in 2017.