According to the report released by gtja, it maintains the "shareholding" rating for BOC Aviation Lease (02588), and benefits from the improvement of debt cost brought by the expected interest rate cut by the Federal Reserve, the target valuation ratio is adjusted to 1.24xPB of the average listed companies, with a target price of HKD87.13. The company achieved a revenue of 1.174 billion USD in the first half of 2024, a YoY increase of 10.65%; the net income attributable to shareholders was 0.46 billion USD, a YoY increase of 75.57%, which exceeded market expectations and was mainly due to the reversal of aircraft impairment provisions, growth in financing lease interest income, and increase in net gain on aircraft sales. The company declared a semi-annual dividend of $0.1988 per share, up 76% YoY, and has maintained a stable payout ratio of 30%.

GTJA's main opinions include:

Strong passenger demand drives revenue growth, combined with reversal of impairment provisions pushing profit improvement beyond expectations.

In the first half of 2024, the company's revenue increased by 10.65% YoY, with operating lease revenue of 0.928 billion USD remaining stable; financing lease revenue of 0.096 billion USD increased by 379.5% YoY, and is expected to be driven by the stable growth of air transportation passenger volume and the strong demand for financing lease due to insufficient supply of new aircraft delivery on the supply side. The tight supply of aircraft in the industry has driven the company's growth in aircraft delivery against the trend. The company delivered a total of 18 new aircraft in the first half of 2024 (compared to 15 in the same period in 2023) and sold 15 aircraft (compared to 3 in the same period in 2023). Tight aircraft supply has driven strong demand for aircraft and continuous increase in aircraft value. In addition, the company's costs and expenses in the first half of 2024 were 0.665 billion USD, a YoY decrease of 13.1%, mainly due to the net reversal of aircraft impairment provisions of 0.17 billion USD. The growth in revenue and improvement in cost jointly drove the net income attributable to shareholders to 0.46 billion USD, a YoY increase of 75.57%.

Diversified financing channels, expected to benefit from the strengthening expectation for rate cut by the Federal Reserve and further improvement in expected funding costs.

The company's debt financing comes from unsecured promissory notes and unsecured loan facilities, and it benefits from the long-term support of Bank of China Group, excellent investment-grade corporate credit ratings (FITCH and S&P global ratings are both A-), and diversified debt financing channels. As of the end of June 2024, the company has $4.9 billion in unutilized unsecured loan facilities, including $3.1 billion due in December 2026 from Bank of China Group. With the strengthening of the expected interest rate cut by the Federal Reserve, it is expected to push down the company's financing costs and drive continuous improvement in profits.

Catalyst: The demand for financing lease continues to be strong in the airlines industry; overseas interest rates continue to decline.

Risk Warning: Air transportation demand falls short of expectations; interest rate cuts fall short of expectations.