\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 838 Bank Of Chengdu Co.Ltd(601838) )
Bank Of Chengdu Co.Ltd(601838) is expected to continue to benefit from the advantages of regional economic environment and the construction of Chengdu Chongqing double city economic circle. The scale expansion may strongly support the high performance growth. Since 2016, the company’s asset quality has improved, the low cost of the liability side supports the low-risk preference of the asset side, forms a virtuous circle of liability, asset and asset quality, and strengthens the certainty of Bank Of Chengdu Co.Ltd(601838) profit. High growth scarce targets are included in the recommended portfolio and pay attention to the process of debt to equity swap.
Key points supporting rating
The support scale of regional economy and Chengdu Chongqing double circle strategy is increasing rapidly, with high performance and growth expected to maintain
Bank Of Chengdu Co.Ltd(601838) in recent years, the scale has maintained a rapid growth trend. In the first three quarters of 2021, the asset scale increased by 16.8% year-on-year, which is the most core factor driving excellent performance (revenue and net profit increased by 26.0% and 22.2% year-on-year respectively). We believe that Bank Of Chengdu Co.Ltd(601838) ‘s high performance and growth are expected to continue, due to the advantages of regional economy, the project opportunities brought by the construction of Chengdu Chongqing economic double circle, and the improvement of Bank Of Chengdu Co.Ltd(601838) local market competitiveness.
Asset quality continued to improve, and debt cost advantage supported asset side low-risk preference
Since 2016, Bank Of Chengdu Co.Ltd(601838) increased the clearance of asset quality and improved the non-performing indicators. At the same time, the company adjusted its risk appetite and structure, increased the investment of low-risk assets (public infrastructure and retail mortgage), controlled the newly generated non-performing assets, and the asset quality trend was better. With the accelerated pace of industrial transformation in Chengdu, the project opportunities brought by the economic construction of Chengdu and Chongqing, and the low-risk preference of the asset side supported by the company’s low debt cost advantage, we believe that the asset quality of the company is expected to remain stable.
Pay attention to the process of converting 8 billion yuan of convertible bonds into shares
By the end of the third quarter of 2021, Bank Of Chengdu Co.Ltd(601838) core tier 1 capital adequacy ratio was 8.34%, which was higher than the bottom line of regulatory requirements (7.5%), but restricted the ability of asset side investment Bank Of Chengdu Co.Ltd(601838) has issued 8 billion yuan of convertible bonds. According to the static calculation, the core tier 1 capital adequacy ratio will be increased by 1.53 percentage points after the conversion. The closing price of the company on March 14 was 13.75 yuan. Since 2022, it has reached the conversion price for many times, with a discount of about 5% and 27% from the conversion price and strong redemption price respectively. It is suggested to pay attention to the process of convertible bond conversion.
Valuation
We raised the EPS of Bank Of Chengdu Co.Ltd(601838) 2021 / 2022 to 2.02/2.48 yuan (formerly 1.95/2.26 yuan), the corresponding net profit growth rate was 21.1% / 22.9% (formerly 16.8% / 15.8%), and the corresponding price to book ratio of the current stock price was 1.10/0.96x, maintaining the overweight rating.
Main risks of rating
The economic downturn led to the deterioration of asset quality exceeding expectations and financial supervision exceeding expectations.
