Bank Of Chengdu Co.Ltd(601838) (601838)
Ping An View:
Company profile: a leading city firm rooted in Chengdu. Bank Of Chengdu Co.Ltd(601838) was founded in 1996 and headquartered in Chengdu. By the end of the third quarter of 2021, the company’s total assets had reached 746.5 billion yuan, ranking eighth among listed urban commercial banks in China. The proportion of Bank Of Chengdu Co.Ltd(601838) shares held by Chengdu municipal state-owned enterprises actually controlled by Chengdu SASAC is 30.03%, which is the actual controller of Bank Of Chengdu Co.Ltd(601838) . The background of state-owned assets holding provides a strong competitive advantage for the company to strive for high-quality government enterprise customers and carry out public business.
Serve Chengdu Chongqing high development and enjoy regional policy dividends. The company’s business layout is concentrated in Chengdu. As of 21h1, more than 70% of the loans have been invested in Chengdu. In 2020, the Political Bureau of the CPC Central Committee first defined the major national strategic position of the “two city economic circle in Chengdu Chongqing region”. The national comprehensive three-dimensional transportation network planning outline issued in 2021 listed Chengdu Chongqing, Beijing, Tianjin and Hebei, the Yangtze River Delta, Guangdong, Hong Kong and Macao as the “four poles” of the international comprehensive transportation hub cluster, This is the first time that Chengdu Chongqing twin city economic circle is at the same level as other three developed urban agglomerations in major national planning documents. The promotion of strategic position can bring rich incremental infrastructure projects, which is expected to further highlight the company’s resource endowment advantages in government business.
Low cost deposits derived from corporate resource endowments, and the performance of the liability side is better than that of peers. As of 21h1, the company’s liability side deposits accounted for 77%, ranking in the forefront of comparable listed urban commercial banks. The average cost rate of deposits was only 1.98%, which was only higher than Bank Of Ningbo Co.Ltd(002142) among listed urban commercial banks, reflecting the company’s strong deposit bargaining power. Looking forward to the future, considering that the company has always adhered to the strategy of “establishing banks with deposits” and has established a good and stable cooperative relationship with local governments and financial departments for a long time, and has established a number of stable partners including municipal key and government customers, we believe that the competitive advantage of the liability side of the company is expected to be maintained.
Continue to resolve stock risks and gradually consolidate asset quality. Since 2016, with the stabilization of local economy and relatively sufficient customer risk exposure, the company has continued to increase risk disposal and strengthen risk management and control, the trend of asset quality improvement is obvious, the non-performing rate has decreased year by year, and the burden of asset quality has been continuously cleared. In terms of peer benchmarking, the company’s stock asset quality index has been in the leading position in the industry. As of 21h1, the proportion of non-performing + concern was only 1.74%, and that of urban commercial banks was only higher than Bank Of Ningbo Co.Ltd(002142) , Xiamen Bank Co.Ltd(601187) , Bank Of Hangzhou Co.Ltd(600926) .
Investment suggestion: enjoy the regional resource endowment and be optimistic about the rise of valuation. Bank Of Chengdu Co.Ltd(601838) as an urban commercial firm rooted in Chengdu, the strategy of Chengdu Chongqing double city economic circle is upgraded, and the future development potential of the company is worth looking forward to. In addition, the company’s 8 billion convertible bonds have been approved by the CSRC, and the supplement of capital can effectively support the company’s scale expansion. At present, the corresponding Pb valuation of the company’s share price in 21 and 22 years is 0.92x/0.81x respectively. Considering the growth and asset quality advantages brought by the company’s regional resource endowment, we are optimistic about the continuation and rising space of the company’s valuation premium, and give a “strongly recommended” rating for the first time.
Risk tips: 1) the economic downturn leads to higher than expected pressure on the quality of industrial assets; 2) Regional economic development is less than expected; 3) The escalation of Sino US friction has led to an increase in external risks.
