\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 963 Bank Of Chongqing Co.Ltd(601963) )
Key investment points
Bank Of Chongqing Co.Ltd(601963) was established on September 19, 2007, formerly known as Chongqing City cooperative bank established in 1996. In 2013, it was listed on the main board of the Hong Kong stock exchange, becoming the first urban commercial bank to be listed on the Hong Kong stock exchange. In 2019, it landed in A-Shares and became the 15th bank to be listed in both A-Shares and H shares. By the end of 2021, the company had 156 branches, including the head office business department, small enterprise credit center and four first-class branches, covering all districts and counties of Chongqing and some regions such as Sichuan, Shaanxi and Guizhou Bank Of Chongqing Co.Ltd(601963) equity is diversified, and the shareholding of municipal state-owned assets, Hong Kong funded banks and private enterprises is relatively balanced. By the end of 2021, there were 6 shareholders holding more than 5% of the bank’s shares, including Hong Kong Central Clearing, Chongqing Yufu, Daxin bank, Lifan shares, Saic Motor Corporation Limited(600104) and Fude life insurance. Chongqing Yufu, Chongqing Road & Bridge Co.Ltd(600106) , Chongqing real estate and Chongqing water conservancy are subordinate enterprises of Chongqing SASAC. The shareholders of the company are relatively diversified and the advantages of local resources are obvious.
Bank Of Chongqing Co.Ltd(601963) build a “1-3-3” development strategic pattern and promote high-quality development. “1” strategic vision: to build a national first-class listed commercial bank with “adhering to the origin, distinctive characteristics, safety, stability and excellent value”. “3” key tasks: implement the strategic vision, achieve high-quality development, and fully promote the three key tasks of “service improvement, digital transformation and characteristic development”. “3” empowerment system: create three systems of “science and technology empowerment, talent empowerment and management empowerment”, deeply stimulate the vitality of business development and fully support high-quality development.
The impact of the issuance of convertible bonds on the company’s financial indicators: 1. 13 billion convertible bonds were successfully issued, and the static calculation improved the core tier 1 capital adequacy ratio by 2.82 PCT Bank Of Chongqing Co.Ltd(601963) successfully issued 13 billion convertible bonds on March 29, 2022 and entered the conversion period on September 29, 2022. The initial conversion price of heavy bank convertible bonds is 11.28 yuan (corresponding to 1 times Pb in 2020), the compulsory conversion price is 14.67 yuan (corresponding to 1.3 times Pb in 2020), and the current price is 9.20 yuan (closing price on April 1), 59.5% away from the compulsory conversion space. Assuming that all 13 billion convertible bonds are converted into shares, the static calculation can improve Bank Of Chongqing Co.Ltd(601963) core tier 1 capital adequacy ratio by 2.82pct to 12.17%., Capital strength has been greatly consolidated. 2. Impact on roe: short-term roe decreased by 1.42%. Assuming that the convertible bonds will be converted into shares in 2022, according to the calculation that the net profit of 2022e will increase by 7.59% year-on-year, the return on net assets of 2022e will decrease by 1.42 percentage points after the conversion of convertible bonds into shares. Roe is diluted in the short term, but in the medium and long term, capital consolidation ensures the company’s sustainable profitability.
Highlights of the annual report: 1. The annual revenue maintained double-digit growth, and the profit growth before provision also remained high, achieving a growth of 10.2%. Since 2020, the company has maintained a high provision, and the growth rate of net profit can still be improved quarter by quarter, with a year-on-year increase of 5.4%. 2. Corporate lending remained high. In the year of 21, corporate credit increased by 61%, and infrastructure investment in leasing business and water conservancy public management increased by 32.1% and 37.1%, supporting the loan investment in the whole year. 3. The quality of bad assets decreased, and the provision increased steadily. The non-performing amount was 4.106 billion, and the non-performing rate was 1.30%. It continued to decline 3bp month on month in the third quarter. The coverage of provision for non-performing assets increased by 0.6 percentage points to 272.24% month on month. 4. The annualized cost income ratio in a single quarter decreased year-on-year. Q4 single quarter annualized cost income ratio was 27.7%, down 1.3 percentage points from the same period last year. The cumulative management fee increased by 15.6% year-on-year, which was significantly improved from 23.4% year-on-year in the third quarter. 5. The core tier 1 capital adequacy ratio rose month on month. In 2021, the core tier 1 capital adequacy ratio, tier 1 capital adequacy ratio and capital adequacy ratio were 9.36%, 10.45% and 12.99% respectively, with a chain comparison of + 11bp, + 11bp and + 11bp.
Insufficient annual report: the net interest income in the first and fourth quarters was – 2.8% month on month, and the annualized interest margin in a single quarter decreased 8bp to 1.93% month on month. The narrowing of interest margin is mainly due to the drag on the asset side, and the asset side yield is down 5bp month on month. It is expected that it is mainly due to the influence of structure and interest rate factors. The company’s credit growth in the fourth quarter remained stable. From the perspective of the internal structure of credit, the scale of retail loans decreased month on month, and the proportion of retail loans in assets decreased significantly. At the same time, the interest rate of new loans is expected to decline. 2. Personal loans were mainly affected by the contraction of consumer loans, and the proportion of new business and consumer loans fell to 15.3%. Affected by the new regulations on Internet loans, the scale of consumer loans decreased by 11.25 billion compared with 20 years, dragging down the investment of individual loans throughout the year. 3. The net handling fee income was – 25.9% year-on-year, mainly due to the year-on-year decrease of 28.9% in agency financial management income. Financial products are transformed to net worth type, and the excess rate of return is low, which affects the income of agency financial management business.
Investment suggestion: 2022e, 2023epb0 68X/0.62X，PE6. 37x / 5.88x (City Commercial Bank 2022e, 2023epb0.77x/0.68x; pe6.47x / 5.72x). The company is located in Chengdu Chongqing economic circle. The regional economy is undergoing transformation and development, and the ownership structure is decentralized and balanced. Driven by net interest income and management expenses, the profitability tends to rebound in recent years, and ROA is at the upper level of the industry in comparable industries. In recent years, the company’s loans have increased significantly, accounting for a higher proportion than that of its peers, and the comprehensive pricing of loans has remained at a not weak level. With the recovery of Chongqing’s economy, the asset quality has improved year by year, and the non-performing rate is below the average level of urban commercial banks. For the first time, the coverage is rated as “overweight”, and it is recommended to maintain positive attention.
Risk tip: the macro-economy is facing downward pressure, the business performance is less than expected, and the information and data used in the research report are not updated in time.
