\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 128 Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) )
Matters:
Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) released the first quarterly report of 2022. In the first quarter, the operating revenue was RMB 2.128 billion, with a year-on-year increase of 19.3%, and the net profit attributable to the parent company was RMB 659 million, with a year-on-year increase of 23.4%, with an annualized roe13.5% 05%, a year-on-year increase of 1.36 percentage points. The total assets at the end of the period were 268.7 billion yuan, an increase of 9.0% over the beginning of the year.
Ping An View:
The performance growth was brilliant, and the volume and price rose together to promote the rapid growth of revenue Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) in the first quarter, the net profit attributable to the parent company increased by 23.4% (vs + 12.3%, 2021) year-on-year, and the company’s revenue performance was also strong, with a year-on-year increase of 19.3% (vs + 16.3%, 2021). In terms of splitting, interest income was the core driving force driving the growth of operating revenue. In the first quarter, Changshu’s net interest income increased by 24.0% year-on-year, the highest level of net interest income since 2017. We judge that it is mainly due to the rebound of net interest margin and the rapid increase of scale. In the first quarter, affected by the income recognition after the financial net worth transformation, it increased by only 540000 yuan in a single quarter, significantly lower than 82 million yuan in the same period last year. It is expected to recover gradually in the subsequent quarters. Under the triple pressure of the economic environment, the company still maintains a rapid revenue growth, reflecting the company’s differentiated operation advantages.
The interest rate spread stabilized and rebounded, and the investment of micro loans accelerated. Changshu’s net interest margin in the first quarter was 3.09% (vs3.06%, 2021a), which has continued to rise since 2021h. The company’s strategic advantage of serving “three rural and two small” enterprises has gradually been reflected. The company’s total loans in the first quarter increased by 6.3% year-on-year, and its total assets increased by 9.0% year-on-year. From the perspective of loan delivery direction, micro loans have made significant efforts. Small and micro loans below 10 million yuan account for 75.4% and 56.0% of new loans, providing support for the company’s interest income. We believe that with the increase of the company’s inclusive finance pilot areas in the future, the growth rate of microfinance may usher in a new round of explosive growth.
Deposits grew well, mainly driven by fixed-term loans. At the end of the first quarter, the company’s deposit scale increased by 11.8% over the beginning of the year, exceeding the loan growth rate (YoY + 6.3%). Among them, time deposits increased by 12.3% over the beginning of the year, and demand deposits decreased by 0.04% over the beginning of the year. We believe that the sluggish demand growth is partly affected by the weak economic environment in the first quarter. Considering that the uncertainty of the external environment in the subsequent quarters is still large, how to ensure the stability of living has become an important issue facing the company.
The quality of assets continued to improve, and the level of provision coverage remained high. The company’s non-performing rate at the end of the first quarter was 0.81%, unchanged for three consecutive quarters, maintaining an excellent level in the industry. In terms of forward-looking indicators, the company’s concern rate at the end of the first quarter was 0.94%, an increase of 5bp over the beginning of the year, and the potential pressure was relatively small. While the company’s non-performing rate remained stable, it continued to increase the provision, with a provision coverage rate of 533%, an increase of 0.91% over the beginning of the year. It is an absolute leading position in the industry, with sufficient safety margin and outstanding anti risk ability.
Investment suggestion: we are optimistic about the steady progress of retail and small and micro businesses. The company has always adhered to the market positioning of “agriculture, rural areas and small businesses”, continued to take the road of differentiated development through deep cultivation of Inclusive Finance, sinking customer base and remote expansion, and steadily developed retail and small and micro businesses. Over the past 20 years, the company’s interest margin performance has been greatly affected by small and micro businesses. From the first quarter report, the interest margin has begun to maintain a steady growth trend. With the easing of the epidemic in the future and the recovery of the demand of small and micro enterprises and retail customers, the company is expected to fully benefit. We maintain the company’s profit forecast for 22-24 years, with corresponding EPS of 0.99/1.21/1.45 yuan and corresponding profit growth of 24.0% / 21.9% / 20.4% respectively. At present, the company’s share price corresponds to 1.1x/1.0x/0.9x Pb in 22, 23 and 24 years respectively. We are optimistic about the development space of the company’s small and micro business for a long time and maintain the “strongly recommended” rating.
Risk tips: 1) the economic downturn leads to higher than expected pressure on the quality of industrial assets. 2) The decline in interest rates led to a narrower than expected industry interest margin. 3) The increase of cash flow pressure of real estate enterprises leads to the rise of credit risk.
