Company Overview: The shareholder debt crisis was resolved, and Bohai Leasing, focusing on the aircraft and container business, was originally an industrial leasing company. It rapidly expanded through license layout, asset mergers and acquisitions, etc., and acquired high-quality overseas leasing assets such as Seaco, Cronos, Avolon, and CIT respectively during 2014-2017, becoming the leading global leasing company. HNA Group's bankruptcy and restructuring was completed in 2022, and the actual controller of the company was changed from the Hainan Cihang Foundation to no actual controller. The company focuses on the main leasing business, vigorously develops operational leasing, and forms a business layout centered on aircraft and container businesses. Looking at the revenue structure, about 80% of the company's revenue in 2023 came from the aircraft business, and nearly 20% came from the container business.

Aviation leasing: The gap between supply and demand exacerbates the shortage of aircraft. The size of the aviation leasing market with the company's largest orders continues to expand, and the penetration rate is steadily increasing. From 1980 to 2023, the global fleet expanded from 2,850 to 23,561, and the operating lease penetration rate increased from 2.4% to 51.3%; the long-term effects of the industry were outstanding, with the total share of the top 20 leasers reaching 72.3%. At the end of 2023, Avolon's fleet was worth $20.82 billion and 576 aircraft respectively, ranking 4th and 3rd in the world, respectively. Looking ahead to the future market, global passenger demand has surpassed 2019, but aircraft production capacity has fallen to a historic low, and aircraft values and rents are expected to continue to rise; the company ordered 458 aircraft, ranking first in the industry, and will benefit more fully in the future.

Container leasing: The third largest leasing company in the world. The shipping boom cycle is expected to continue to increase in yield. At the end of 2023, about 48.5% of the world's containers are held by leasing companies, and the penetration rate is expected to reach 52.6% in 2027; judging from the pattern, the industry concentration is high, and the top five container leasing companies account for 84.8% of the market share. From the perspective of the company itself, the company owns and manages a fleet of 4.087 millionCEU. It is the third largest container leasing company in the world, serving more than 750 customers, and has 23 operation centers and 352 cooperative depots worldwide. Looking ahead, benefiting from the shipping boom cycle, container leasing performance is expected to rise.

Financial performance: Net leasing spreads widen, and the company's performance is expected to improve. From the asset side, the gap between aircraft supply and demand continues to increase. Bohai leased aircraft rents and aircraft values are in an upward channel, and the trend is difficult to reverse in the short term. On the debt side, the company's foreign debt accounts for a relatively high proportion, accounting for more than 80% of overseas debt at the end of 2023. However, at present, the US job market is weakening and the liquidity pressure on the financial system is high. Combined, the high inflation rate has declined markedly, and there is a high probability that the Federal Reserve will cut interest rates in the future. At the same time, the company's credit level is good, subsidiary ratings are positive, and financing costs are expected to improve. Driven by both sides of assets and liabilities, the company's net leasing spread is expected to widen, driving the company's overall performance growth.

Profit Forecasts, Valuations, and Ratings

We expect the company's total revenue for 2024-2026 to be 35.918, 37.899, and 39.857 billion yuan, respectively, with year-on-year growth rates of +6.66%, +5.51%, and +5.17%, respectively, and a 3-year CAGR of 5.78%. Net profit attributable to mother was 1.544, 1.847, and 2.134 billion yuan respectively. The year-on-year growth rates were +20.50%, +19.64%, and +15.50%, respectively, and the 3-year CAGR was 18.53%. Given that the company's aircraft leasing business has significant advantages, benefiting from the gap in aircraft supply and demand and the Federal Reserve's interest rate cut expectations, the company's leasing interest spreads are expected to expand in the future, and the company's fundamentals are expected to improve. Currently, the average PB value of comparable companies in 2024 is 0.85 times, and the company's PB is only 0.53 times. Subsequent valuations are expected to increase. First coverage, giving a “buy” rating.

Risk warning: rising interest rates, geopolitics, upstream delivery delays, debt rollover risk, business change risk.