CICC: BOC AVIATION (02588) delivery has steadily improved, target price raised to HK$87.9

Zhongjin released a research report stating that BOC AVIATION (02588) released its fourth quarter operating data for 2025. Looking ahead, with gradual improvement in deliveries combined with the environment of rate cuts by the Federal Reserve, it is believed that the company may enter a period of growth where both volume and price rise concurrently, creating steady potential for valuation increase. Considering the company's benefit from industry supply-demand dynamics and rate cut cycle, the target price is raised by 8% to 87.9 Hong Kong dollars, maintaining an "outperform" rating, corresponding to an upward space of 8.8% and a market-to-book ratio of 1.2 times, 1.1 times, and 1 times for the years 2025 to 2027. The bank pointed out that since the second half of last year, the Federal Reserve has entered a rate-cutting cycle, with floating-rate liabilities accounting for 29% of the company's outstanding debt in the first half of this year, showing strong sensitivity to rate cuts. In terms of new debt issuances, the company issued 5.5-year and 7-year corporate bonds on August 26 last year and January 12 this year, with corresponding coupon rates of 4.25% and 4.375%, respectively. Looking ahead, it is believed that improvements in deliveries combined with overseas rate cuts will drive a steady increase in the company's ROE. Zhongjin largely maintains the company's earnings forecast for 2025 to 2026 unchanged, introducing a profit forecast of $931 million for 2027.