Morgan Stanley: Lowered the target price for BOC AVIATION (02588) to HKD 92.3, maintaining an "Overweight" rating.

Morgan Stanley has released a report stating that it has lowered the target price for BOC AVIATION (02588) from HKD 96.7 to HKD 92.3, while maintaining an "Overweight" rating. The bank has revised its net profit forecasts for 2026 to 2028 downward by 4.5%, 4.4%, and 2.2% respectively, reflecting lower leasing net yield, lower other income, and higher effective tax rates. Morgan Stanley believes that the acceleration of aircraft deliveries is the main driver of profits and is optimistic about the quality of BOC AVIATION's premium aircraft assets and its counter-cyclical strategy. Original equipment manufacturers are continuing to increase production, and the conflict in the Middle East has not yet disrupted deliveries. However, if the current energy shock persists, the prospects for U.S. interest rate cuts and the profitability of global airlines may weaken. In terms of valuation, Morgan Stanley employs a probability-weighted price-to-book ratio valuation approach (optimistic scenario 15%, base scenario 70%, pessimistic scenario 15%). The optimistic scenario gives a valuation of 1.2 times the forecasted price-to-book ratio for mid-2027, while the base scenario is 1.1 times and the pessimistic scenario is 0.9 times. The target price of HKD 92.3 corresponds to a forecasted price-to-book ratio of 1.1 times for mid-2027, roughly in line with the historical average since its listing in 2016.