According to the research report released by GF Securities, BOC Aviation Leasing (02588) is rated as "buy", based on its performance in the first half of 2024 and the continued high level of macro interest rates. The net profit attributable to the owners of the company is expected to be RMB 840 million and RMB 890 million in 2024 and 2025, respectively. After deducting the impact of Russian insurance compensation, the core net profit in 2025 is expected to have a magnified growth rate under the background of interest rate cuts and cost declines, with a reasonable value of HKD 78. The company delivered a total of 18 aircraft and sold 15 aircraft in the first half of 2024, compared with 16 aircraft delivered in the same period last year, including one managed aircraft and a total of 3 aircraft sold.

The main points of the report are as follows:

Operation level:

(1) The company's business data has improved significantly, especially the significant increase in aircraft sales data. The high-growth aircraft sales volume may bring elastic growth in net sales revenue in the first half of the year.

(2) As of Q2 2024, the average age of the company's own fleet is 4.9 years, which has increased compared to 4.6 years in 2023, reflecting the decrease in supplier delivery levels. The increase in aircraft age may promote the company to increase the sales of old assets, and drive the growth of aircraft sales revenue for the whole year.

Delivery aspect:

In terms of delivery, Boeing and Airbus delivered 131 and 256 aircraft respectively in January-May 2024, while Boeing and Airbus delivered 206 and 244 aircraft respectively in January-May 2023. The overall delivery level continued to deteriorate against the background of frequent safety issues with Boeing, while 24Q1 RPK and ASK both turned positive compared to the same period in 2019. Based on this, rental rates are expected to continue to grow.

Interest cost aspect:

In October 2023, the 10-year US Treasury bond yield fell from its high level. At the beginning of 2024, the new US bond coupon rate issued by the company was lower than the end of last year, which was obviously benefited from the decline in overseas interest rates. According to data from the US Department of Labor on July 5, 2024, the number of new non-agricultural workers in the United States in June 2024 was 0.206 million, higher than the market expectation of 0.19 million, but lower than the previous value of 0.218 million, based on this, which may magnify the expectation of an interest rate cut.

Risk warning: The recovery of the aviation industry, the pace of overseas interest rate cuts is slower than expected, and geopolitical risks, etc.