Wuxi Rural Commercial Bank Co.Ltd(600908) (600908)
Wuxi Rural Commercial Bank Co.Ltd(600908) is rooted in Wuxi, with outstanding local customer base and network advantages. It can share the dividends of local high Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) rapid growth, rapid economic development and residents' wealth accumulation. It also has potential to expand in other regions of Jiangsu, and its scale, income and profit are expected to continue to grow rapidly. The company has low risk appetite, prudent risk control, good asset quality or continuous performance, and good future profit stability. We believe that the company may improve its relative valuation while repairing the overall valuation of rural commercial banks.
Wuxi has strong economic advantages. Wuxi is economically developed, and its total GDP ranks third in Jiangsu Province, only lower than that of Suzhou and Nanjing. The industrial structure is constantly upgraded, and high Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) such as the Internet of things, integrated circuits and biomedicine have leading advantages. Finance and real estate are relatively stable, and residents' income and wealth are relatively high.
The company takes root in Wuxi and has a good customer base in Wuxi. The company's outlets and businesses are mainly concentrated in Wuxi, and the number of local outlets ranks in the forefront of the industry. Loans in Wuxi account for 77%, accounting for about 5% of the market share in Wuxi. The company has an absolute advantage in Wuxi citizen card business, with nearly 5.1 million citizen cards, and has a high coverage of retail customers in this area. The top ten shareholders of the company are mainly local state-owned enterprises and private enterprises, and the management mainly cultivates growth in the bank.
Prudent risk control and excellent asset quality. The non-performing rate and overdue proportion are at a low level in the comparable industry, and the non-performing + concern is at the lowest level in the comparable industry. The company's good asset quality does not rely on write off, and its non-performing proportion is also among the best in the industry. The excellent risk control is long-term and sustainable. The new non-performing enterprises are at the lowest level in the comparable industry, with sufficient provisions and low credit cost.
The profitability of net assets and assets can be compared with that of the same industry. The company has relatively comparable peer advantages in cost control, handling fee income, asset quality and provision, and the interest margin is relatively low. The weak interest margin is mainly due to the low loan yield, in which corporate loans account for a relatively high proportion and retail mortgages account for a relatively high proportion; The interest payment rate of deposits is high, and the proportion of time deposits is high. The interest margin reflects the fierce competition in the banking industry in Wuxi. Combined with the low non-performing and credit costs, the interest margin may also come from the company's low risk preference.
Valuation
We believe that the scale growth of the company inside and outside Wuxi district is sustainable, and there is room for both public and retail; The marginal pressure of interest margin policy is gradually relieved; Retail business may promote the sustained and rapid growth of handling charges; With the transmission of economic pressure, the generation of non-performing assets may rise, the comparative advantage may still exist, and the credit cost may still be low. The company's profit is expected to maintain rapid growth.
Based on our forecast, Wuxi Rural Commercial Bank Co.Ltd(600908) pb0.5% in 2021 78x, 2022 pb0 69x, giving overweight rating for the first time.
Risk tip: the economy has fallen sharply, exceeding expectations; Wuxi's local economy or core industries were impacted by the downturn than expected.
