CICC has released a research report stating that it maintains its 2025 earnings forecast for CALC (01848) largely unchanged, while introducing a 2026 earnings projection of HK$475 million. The company is currently trading at 0.79x/0.75x 2025e/2026e P/B ratios. Considering the continued strong market conditions in the aircraft sector, CICC has raised the company's target price by 22% to HK$5.0 (0.84x/0.80x 2025e/2026e P/B with 6% upside potential) and maintains its Outperform rating.

**Company Update** CALC previously announced its 1H25 results, with first-half profits growing 7% year-over-year to HK$140 million. Cost improvements have shown effectiveness, and aircraft disposals contributed significant incremental gains. CICC recently organized a conference call with the company to discuss industry and company developments. With the sustained high market activity and the company's global expansion and cost reduction strategies working in synergy, CICC suggests continued attention to the company's long-term profit recovery process.

**Medium-term Outlook: Cost Improvements as Core Growth Driver, Aircraft Disposals Expected to Generate Substantial Returns**

**Revenue Side:** 1) The company's leasing revenue decreased 14.1% year-over-year to HK$1.91 billion in the first half, accounting for 79% of total revenue, primarily due to fleet size reduction from aircraft disposals. In the second half, the company plans to take delivery of 15 new aircraft versus an expected sale of 6-10 aircraft. The recovery in owned fleet size will provide support for rental income performance.

2) Net aircraft trading income surged 1,060.2% year-over-year to HK$290 million, corresponding to the sale of 19 aircraft, up 14 aircraft year-over-year. Given the high valuation environment for aircraft assets, CICC believes the company's accelerated aircraft asset disposals should help realize asset premiums and support profit performance.

**Cost Side:** In the first half, balance sheet contraction (interest-bearing debt down 11.0% year-over-year) and marginal monetary easing (USD SOFR down 90bps year-over-year to 4.47%) led to a 17.6% year-over-year decrease in interest expenses to HK$1.1 billion. The company's leverage ratio decreased from 9.1x at end-2024 to 8.4x. The company will continue to focus on optimizing debt and capital structure through diversified financing and deleveraging to improve ratings, thereby reducing financing costs and enabling profit recovery.

**Sufficient Order Book and Quality Customers as Key Long-term Sustainable Development Support**

As of end-1H25, the company's fleet comprised 181 aircraft, including 151 owned aircraft (down 8 from year-end) and 30 managed aircraft. The company's owned fleet consists primarily of high-liquidity narrowbody aircraft (89%), leading the industry. Currently, the order book reaches 114 aircraft. Against the backdrop of tightening supply chains, the company's substantial order book provides support for future growth.

Regarding customer distribution, the company is consolidating its leading position in the Chinese market while actively expanding its global quality customer base. Aircraft leased to overseas airlines account for 33% of the fleet. This global market positioning strengthens growth capabilities.

**Risk Factors:** Geopolitical risks; demand recovery falling short of expectations; aircraft delivery delays.