Stock Analysis & Valuation China Aircraft Leasing Group Holdings Limited (1848.HK)

• Previous Close: HK$4.85
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, HK$	Upside, %
Artificial intelligence (AI)	33.84	598
Intrinsic value (DCF)	1.33	-73
Graham-Dodd Method	4.86	0
Graham Formula	4.67	-4

Strategic Investment Analysis

Company Overview

China Aircraft Leasing Group Holdings Limited (CALC) is a leading aircraft lessor headquartered in Hong Kong, providing comprehensive aviation leasing solutions to airlines globally. Founded in 2006 and listed on the Hong Kong Stock Exchange, CALC operates across the entire aircraft lifecycle including aircraft leasing, purchase and leaseback transactions, portfolio trading, asset management, fleet upgrades, and aircraft disassembly services. The company serves airline clients primarily in Mainland China while expanding internationally, with a fleet of 127 owned and 25 managed aircraft as of December 2021. As a specialized player in the industrials sector's rental and leasing services industry, CALC leverages its strategic position to bridge Chinese aviation demand with global aircraft supply. The company's integrated business model encompasses financing, management, and maintenance-repair-overhaul services, positioning it as a one-stop aviation solutions provider in the rapidly growing Asian aviation market.

Investment Summary

CALC presents a specialized investment opportunity in aircraft leasing with moderate appeal. The company's 0.68 beta indicates lower volatility than the broader market, while its HKD 0.30 dividend provides income appeal with an approximate 6% yield at current prices. However, significant concerns include extremely high leverage with HKD 48.6 billion total debt against HKD 3.5 billion market capitalization, creating substantial financial risk. The negative capital expenditures of HKD -9.3 billion suggests aggressive fleet expansion but raises questions about sustainable growth funding. While operating cash flow of HKD 3.0 billion appears healthy, debt servicing requirements may pressure future profitability. The company's strategic positioning in China's aviation growth story offers potential upside, but investors should carefully weigh the substantial leverage against growth prospects in the post-pandemic aviation recovery.

Competitive Analysis

CALC competes in the global aircraft leasing market with a distinct focus on China and Asian markets, providing it with regional advantages but also creating concentration risks. The company's competitive positioning is built on its integrated service model that spans the entire aircraft lifecycle, from leasing to disassembly and component sales, differentiating it from pure-play lessors. CALC's strategic location in Hong Kong provides advantageous access to both Chinese airline customers and international capital markets, while its growing fleet of 152 aircraft (owned and managed) represents scale benefits. However, the company faces intense competition from global giants with larger fleets and lower funding costs. CALC's high leverage ratio of approximately 14x debt-to-equity significantly impacts its competitiveness by increasing capital costs and reducing financial flexibility compared to better-capitalized peers. The company's specialization in the Chinese market provides deep customer relationships and market knowledge but also creates dependency on China's economic and regulatory environment. While CALC's vertical integration into aircraft disassembly and parts trading provides additional revenue streams, execution risk remains elevated given the capital-intensive nature of these expansions.

Major Competitors

• AerCap Holdings N.V. (AER): AerCap is the world's largest aircraft lessor with over 1,700 owned and managed aircraft, providing massive scale advantages and diversified global presence. The company benefits from significantly lower funding costs and stronger balance sheet compared to CALC. However, AerCap has less specialized focus on the Chinese market where CALC maintains stronger relationships. The Irish lessor's enormous scale creates operational efficiencies but may limit flexibility in serving specific regional needs.
• Air Lease Corporation (AL): Air Lease Corporation operates a modern fleet of over 400 aircraft with strong relationships with both airlines and aircraft manufacturers. The company maintains investment-grade credit ratings, providing cost of capital advantages over CALC. ALC's focus on new technology aircraft reduces maintenance costs but may limit flexibility in serving price-sensitive markets. While globally diversified, ALC has less concentrated expertise in the Chinese aviation market compared to CALC's specialized positioning.
• Avolon Holdings Limited (AVOL): Avolon is a top-three global lessor with over 800 owned and managed aircraft, backed by strategic shareholder Orix Corporation. The company maintains strong credit metrics and global diversification across 150 airlines. Avolon's focus on younger, fuel-efficient aircraft aligns with environmental trends but requires continuous capital investment. While having some presence in Asia, Avolon lacks CALC's deep specialization and network within the Chinese aviation ecosystem.
• BOC Aviation Limited (BOCAIRC.NS): BOC Aviation, backed by Bank of China, is Asia's largest aircraft lessor with over 600 owned and managed aircraft. The company benefits from strong parental support and lower funding costs, directly competing with CALC in the Asian market. BOC's investment-grade rating and larger scale provide competitive advantages in aircraft sourcing and financing. However, as a Singapore-based company, it may have less granular understanding of the Chinese market compared to Hong Kong-based CALC.
• China Development Bank Financial Leasing Co., Ltd. (CDBLEASE.HK): CDB Leasing is a state-backed Chinese lessor with massive scale and extremely low funding costs due to its government ownership. The company dominates the domestic Chinese market and has rapidly expanded internationally. CDB's preferential access to Chinese airlines and cheap capital creates intense competition for CALC. However, the state-owned enterprise may lack the agility and commercial focus of privately-run CALC, particularly in value-added services like aircraft disassembly and trading.