Interest and handling fee income increased significantly, and the company's rental yield was still low due to debt costs. 1) At 1H24, the company achieved operating income of 1.174 billion US dollars, +10.67% YoY, net profit to mother of 0.46 billion US dollars, and +75.87% YoY. 2) The 1H24 aircraft rental rate was 99.1% (99.0% in the same period last year); due to high global interest rates, 1H24 debt cost was 4.6%, +0.7pct YoY, rental yield and net lease yield were 9.75% and 7.00%, respectively (9.78% and 7.00% for the same period last year, respectively), which is still at an all-time low. 3) 1H24's annualized ROE was 15.58%, and the net interest rate was 39.18% (annualized to 9.91% and 24.66% in the same period last year). 4) 1H24 achieved aircraft rental income, interest and handling fee income, and revenue from disposal of aircraft of 0.928/0.132/0.056 billion, respectively, of -1.31%/+118.71%/+300.72% year-on-year respectively.

The number of aircraft delivered and sold has rebounded, and indicators such as order books and new leasing promises indicate that the company's operations are progressing steadily.

1) 1H24 completed capital expenditure of 0.8 billion US dollars, compared to -50% of the same period. 2H24 has committed capital expenditure of 1.9 billion US dollars, and the total target capital expenditure for the whole year is 4 billion US dollars. 2) In 1H24, the pace of delivery and sales of the company's aircraft picked up. By 1H24, the number of aircraft in service was 429, a net increase of 3 aircraft from the beginning of the year. Of these, 19 aircraft were delivered (12 in the order book, 7 aircraft were purchased and leased back, including 1 purchased directly at the time of delivery), and 15 were sold. 3) As of 1H24, the number of aircraft in the company's order book was 219, a decrease of 5 from the beginning of the year, and the share of the fleet dropped to 34.0%, but it had doubled from 104 at the end of '21. As a leading indicator, the order book indicates that the company's operations have recovered steadily. 4) 1H24 signed 55 new lease commitments, an increase of 10 orders over the previous year.

Indicators such as the company's average remaining lease period and the average age of the fleet have not reached an inflection point, but they continue to be optimistic about improving the quality of operations. 1) The company's average remaining lease period has dropped from 8.6 years at the end of 2020 to 7.9 years in 1H24, and remains at the leading level in the industry. 2) The average age of the company's fleet has increased from 3.5 years at the end of 2020 to 4.9 years in 1H24, showing that the speed of fleet upgrading has slowed down in recent years. We expect that with subsequent capital expenditure and the acceleration of aircraft sales, the company's overall operating quality is expected to reach an upward inflection point and continue to improve.

Affected by lower aircraft rental income and still high debt costs, etc., combined with the 24-year semi-annual report, the 24-25 EPS was lowered from 1.12/1.42 to $1.12/1.11, and an additional 26-year forecast of $1.25 was added. Using the historical valuation method, the valuation was based on the company's 5-year average PE. We gave the company a valuation of 9.20x in 2024, and raised the target price to HK$80.33 (US$1 = HK$7.7943). Maintain the company's shareholding rating.

Risk warning

Aircraft deliveries fell short of expectations; net lease yields declined more than anticipated or average debt costs rose above expectations.