Daiwa Research lowered its target price for China Aircraft Leasing Group (CALC) (01848) to HK$7 from HK$10.2 and downgraded its rating to "hold" from "buy".
CALC yesterday issued a profit warning. The earnings plunge was due to investment loss and provisions for Aviation Synergy Ltd of HK$200m and HK$300m unrealised foreign exchange
loss due to the CNY appreciation against the USD.
The research house estimated the losses from Aviation Synergy may be huge. Moreover, the initial investment of HK$218m in Aviation Synergy made in 2020 was largely wiped out.
As per management, CALC's grounded fleet was 5%, much lower than the industry average of 30-50%, mainly due to its high China market exposure and high demand for its narrow-body fleet. Daiwa cut its 2020-22 EPS forecasts by 10-18%.