1-3Q21 deduction of non-net profit is basically in line with our expectations.
Aijian Group announced 1-3Q21 results: total operating income 3.43 billion yuan, year-on-year + 13.3%; return to the mother net profit 1.16 billion yuan, year-on-year + 12.8%, corresponding to the reporting period ROAE + 0.36ppt to 9.55%; deducting non-net profit 940 million yuan, year-on-year-0.66%, basically in line with our expectations, including non-recurrent investment income of 250 million yuan and government subsidies of 13.61 million yuan. The single-quarter net profit of 3Q21 is-24.3% / month-on-month-49.5% to 280 million yuan compared with the same period last year, and the ROAE per quarter is 2.29%.
Development trend
Trade and leasing business led to steady growth of operating income, while investment income contributed to profit increment. Company 1-3Q21 operating income year-on-year + 29% to 1.61 billion yuan, 3Q21 single-quarter operating income year-on-year + 38% / month-on-month + 8.2% to 550 million yuan, mainly driven by rental and trade income growth. In addition, 1-3Q21's investment income from holding and disposing of transactional financial assets / liabilities (except for hedging related to normal business operations) reached 252 million yuan (vs. In the same period last year, 1.92 million yuan), contributed more one-time profit increment.
Aijian Trust promotes the transformation of active management, increasing income from fees and commissions, and periodic pressure on interest income and impairment losses. 1) during the reporting period, Aijian Trust actively managed the increase in project remuneration, which led to 1-3Q21 fee and commission net income from + 33% to 1.43 billion yuan compared with the same period last year; 2) interest income from-45% to 390 million yuan compared with the same period last year, mainly affected by the reduction in the number of structured main financing projects merged by Aijian Trust. 3) the loss of credit impairment (mainly loans and advances) increased by 25.61 million yuan to 89.54 million yuan compared with the same period last year, or because the company's real estate trust business accounted for a relatively high proportion of real estate risk exposure, asset quality declined (in 2020, Aijian Trust's trust assets accounted for 56.3 billion yuan of real estate business, accounting for a proportion of 43.5%vs. In the same period, real estate accounts for 13.97% of the industry capital trust.
The scale of the trust industry has gradually stabilized and rebounded, and its profitability has been repaired; under the intensification of industry differentiation, it is suggested to pay attention to the effectiveness of the company's active management transformation. By the end of the second quarter of 2021, the scale of industry trust assets was 20.64 trillion yuan, with a month-on-month ratio of + 260 billion yuan, which has gradually stabilized and rebounded. From a structural point of view, the scale of collective fund trust is + 0.76% / month-on-month + 3.72% to 10.37 trillion yuan, accounting for + 1.9ppt/1.2ppt to 50.23% compared with the same period last year. The transformation of industry active management is beginning to bear fruit. The impact of the superimposed epidemic has weakened, and the profitability of the industry has been gradually repaired (as of 2Q21, the cumulative profits of trust companies were + 16% year-on-year to 39.6 billion yuan). As far as Aijian Trust is concerned, there is still room to improve the company's ability to invest in research, risk control and product creation; under the intensification of industry differentiation, it is suggested to pay attention to the progress of the company's active management transformation.
Profit forecast and valuation
As a result of raising the investment income assumption, we raised the profit forecast for 2021 to 1.49 billion yuan / 1.56 billion yuan in 2022. The company is currently trading at 0.8 x 2021e Phammer B, maintaining a neutral rating and a target price of 7.86 yuan, corresponding to 1.0x 2021e Pamp B, which has 18% upside compared to the current share price.
Risk
Trust and leasing business growth and asset quality are lower than expected; regulatory uncertainty.