The net profit of 2021H1 is 2.57 billion yuan, due to the low base of income affected by the epidemic in the same period last year, an increase of 25% over the same period last year, in line with expectations. The financial business remains robust, the performance of the new business is outstanding, and the full-year net interest margin is expected to widen by 10-15bps. Operating leases to maintain high growth, and show the optimization of hospital quality. Hongxin Jianfa launched a spin-off listing, which will help to enhance the independent awareness of the project leasing business, release the potential value, or will continue to promote the group valuation revision. Based on the clearness of the spin-off listing, it will be given a doubling of PB in 2022, corresponding to the target price of HK $11.70 for the coming year, maintaining a "buy" rating.
The net profit returned to the mother was 2.57 billion yuan, an increase of 25% over the same period last year, in line with expectations.Far East HongxinThe total income in the first half of 2021 was 16.18 billion yuan, an increase of 22 percent over the same period last year, an increase of 3 percent over the second half of 2020, and the net profit of returning home was 2.57 billion yuan, up 25 percent from the same period last year, and 2 percent higher than the second half of 2020. Mainly due to the impact of the epidemic in the first half of 2020, the exhibition industry of core businesses such as leasing, medical treatment and equipment was blocked, and the income base was relatively low; at the same time, the coverage rate of the provision for the current period remained basically stable and did not continue to be substantially calculated, with a profit of 5.34 billion yuan before provision, an increase of 7 percent over the same period last year.
The performance of the new financial business is outstanding, and the full-year net interest margin is expected to widen by 10-15bps compared with last year. The income of the financial and consulting division of 2021H1 was 11.13 billion yuan, an increase of 15% over the same period last year, accounting for 69% of the total income, of which interest income was 9.36 billion yuan, up 21% from the same period last year. 1) during the period, the average amount of interest-bearing assets reached 248.4 billion yuan, an increase of 16% over the same period last year. The top three incremental contribution sectors are urban utilities, machinery manufacturing and engineering construction. The company's new business directions, such as inclusive finance, business factoring, PPP investment, overseas financing and asset management, contributed 870 million yuan in interest income, an increase of 113% over the same period last year. 2) thanks to the stable pricing of customers by the company, the new superimposed business maintained a higher income pricing, and the average rate of return on interest-bearing assets increased to 7.54%, an increase of 0.3 percentage points over the same period last year. In addition, the company took full advantage of the low-interest environment, and the cost of debt decreased by 0.38 percentage points compared with the same period last year. The net interest margin widened to 3.12 per cent. We expect that as the macro environment still faces challenges, the pace of investment of interest-bearing assets for the whole year will remain steady, slightly lower than the growth rate in the first half of the year, and the net interest margin will converge from the medium term, but will still expand by 10-15bps compared with 2020. 3) the quality of interest-bearing assets remained stable, the rate of non-performing assets remained at 1.1%, the 30-day overdue rate dropped to 0.97%, and the provision coverage rate increased slightly to 255.4%.
Industrial operation and operation leasing maintained high growth, and hospital quality continued to be optimized.
The company's equipment operator Hongxin Jianfa mainly provides business leasing, engineering technology, platform and other, a total of three categories of services. Among them, the operating lease includes different types of equipment and materials, mainly for the new support system, new mold base system and aerial work platform equipment. According to the prospectus of Hongxin Jianfa, Hongxin Jianfa ranks first in all three areas in terms of the number of equipment held in China.
By the end of June, 2021, the holding capacity of Hongxin Jianfa aerial work platform has increased to 77000 units, with about 1.7 million tons of materials, and has more than 230service outlets in 151cities.
2021H1 Hongxin's total revenue was 2.43 billion yuan, up 76% from the same period last year, and its net profit was 230 million yuan, up 56% from the same period last year. Of this total, operating leasing income was 1.73 billion yuan, up 89 percent over the same period last year; engineering and technical service income was 660 million yuan, up 56 percent over the same period last year; and platform income was 45 million yuan.
At the end of June 2021, the number of company-controlled hospitals remained at 29, with more than 12000 beds available, and the actual number of open beds was about 10, 000. In the past year or so, the company has carefully combed the acquired hospitals in the system and stripped some of the main bodies with regulatory risks out of the listed companies.
With the gradual clarity of regulatory policies and a deeper understanding of supervision, after the optimization of hospital quality, the medical operation sector is expected to maintain steady growth. The revenue of the 2021H1 hospital operation sector reached 1.99 billion yuan, up 29% from the same period last year, and the net profit was 110 million yuan, up 293% from the same period last year.
Waiting for Hongxin Jianfa to go public, it will reduce the cost pressure of the parent company and is expected to bring a revaluation. Hongxin Jianfa submitted form A1 to the Stock Exchange on June 30, 2021, and the progress of the spin-off was in line with market expectations. We expect Hongxin Jianfa to complete its listing by the end of this year or early next year. After Hongxin Jianfa completed the Pre-IPO round of financing in April 2021, the far East currently holds an 80.95% stake in Hongxin Jianfa. According to the data at the end of 2020, Hongxin Jianfa accounts for 14% of the far East Hongxin's net assets. Far East Hongxin expects that after Hongxin Jianfa completes the IPO, the company will own more than 50 per cent of Hongxin Jianfa. If Hongxin is spun off and listed smoothly, it will help to identify and establish the independent value of the equipment operation business, and after financing, it will also reduce the dependence on the parent company and effectively alleviate the pressure on the operating costs of Hongxin in the far East. As the income and profit growth rate of the equipment leasing sector is faster than that of the group as a whole, the contribution to the group profit is expected to continue to increase, and the impact of valuation will gradually increase. Due to the significant economies of scale of the stock business model of operating leases and the difference between book depreciation and actual use of equipment, it is expected that profits will be delayed over time or will continue to promote the upward revision of the overall valuation of the Group.
Risk factors. During the downward period of economic growth, asset quality deteriorated significantly; new business risk management did not meet expectations; industrial operation growth and capitalization operation progress was not as expected; subsidiary spin-off and listing progress was not as expected.
Profit forecast and valuation. According to the company's financial report data, we adjust the EPS forecast of 2021max 2022 / 2023 to 1.31max 1.49max 1.71 yuan (the original forecast value is 1.37pm 1.55pm 1.77 yuan), corresponding to the 2021-2023 BVPS forecast of 8.69max 9.67pm 10.81 yuan, the current price corresponding to the PB valuation of 0.84 max 0.76max 0.68 times.
Due to the clarity of Hongxin Jianfa's spin-off listing, it gave the company a valuation of twice PB in 2022, maintaining a "buy" rating corresponding to the target price of HK $11.70 for the coming year.