According to the Zhitong Finance APP, CICC released a Research Report stating that looking ahead to 2025, considering the marginal easing of domestic and foreign monetary policies, high prosperity in segmented industries, and generous dividends, key companies in the leasing industry, including Aircraft, General Equipment, and Ship leasing, will be a "stable + high dividend" quality investment choice. Recommended focuses: 1) BOC AVIATION (02588) which continues to benefit from the industry's high prosperity, possesses quality Assets and financial advantages; 2) Jiangsu Financial Leasing (600901.SH) which has differentiated competitive advantages and fully benefits from interest rate declines.

Aircraft leasing: Continued high prosperity under asset-liability resonance; leasing companies with quality order books and financing cost advantages are expected to demonstrate long-term investment value with short-term profitability contribution from asset realization.

Fundamentals: On the asset side, Global airline demand is steadily recovering, combined with severe supply chain capacity constraints, aircraft asset prices and leasing yields continue to experience significant year-on-year growth, with market prices for aircraft assets reaching historical highs compared to their book value (with old aircraft premiums exceeding 60%). Looking ahead, the industry's high prosperity cycle is expected to continue, however, considering the current gap in aircraft capacity concentrated on new aircraft, the future value growth of new aircraft is expected to be more certain. On the liability side, as the Federal Reserve steadily promotes rate cuts, aircraft leasing companies have already shown marginal improvements in issuing new bonds and floating-rate liabilities in 2H24, and it is anticipated that net leasing yields for lessees may see a recovery under asset-liability resonance in 2025.

Investment analysis: Combining 1) the current high premium of old aircraft; 2) substantial short-term delivery constraints for new aircraft, yet future price expectations are more stable; 3) expected steady improvement in comprehensive financing costs, and past stock price reviews.

CICC stated that looking ahead, aircraft leasing companies with stronger asset value realization capabilities (reflected in relatively older aircraft and faster aircraft sale processes, represented by AerCap) will still demonstrate faster ROE realization speeds in the short term, providing support for short-term valuation performance; while leasing companies with stronger order book deliveries (reflected in earlier order delivery times and large order sizes, represented by Air Lease), and with higher sensitivity to improvements in debt costs (reflected in a high proportion of floating-rate liabilities and advantageous credit ratings, represented by BOC AVIATION) will have a more stable long-term ROE recovery trend, gradually reflecting relative investment value. It is recommended to pay attention to the short-term interest rate cut expectation fluctuations for BOC AVIATION and the long-term ROE recovery value.

General leasing: Under tightening regulations and accelerated transformation, competition on the asset side may intensify, bringing pressure on asset expansion and pricing.

Considering the limitations in personnel and professional capabilities of bank-related financial leasing, the transformation focuses on high unit price equipment, large clients, and mature Industry Chain in the fields of Aviation, Ship, and clean Energy, it is expected that leasing companies with differentiated business development methods (such as vendor leasing) and deep cultivation in small and medium-sized enterprises as well as various segmented industries may achieve more stable Asset performance; additionally, in a loose MMF environment, the bond issuance and interbank borrowing costs of financial leasing companies are expected to improve in the second half of 2024, and the comprehensive financing costs are anticipated to continue to decline moving forward.

Risk Factors

Macroeconomic fluctuations; domestic and foreign MMF loose monetary policy is below expectations; uncertainty in the regulatory environment.