After the transformation of financial control, continue to become stronger, better and bigger. Since 2017, Zhejiang Oriental has formed a financial control platform covering scarce license resources such as trust / futures / insurance / financial leasing / private equity funds through the acquisition of Zhejiang Gold Trust, Land Futures, China and South Korea Life shares, superimposed participation in Yongan Futures, capital increase subsidiaries and other restructuring measures. From 2017 to 2020, the company's financial business income increased from 2.093 billion yuan to 13.937 billion yuan, with an average annual compound growth rate of more than 88.1%. The proportion of the company's revenue increased from 21.3% to 87.9%, gradually surpassing the business business to become the core pillar of the group's income.
Since 2021, the company has accelerated the pace of license layout, and may face a governance inflection point in the coming year. In January 2021, the company announced that it intends to conduct a private placement, which will be used to complete the capital injection into Zhejiang Gold Trust and replenish its working capital totaling about 2.5 billion yuan, increasing the proportion of shares held by the Group to 87% (at present, it has been increased by its own funds). In March 2022, the company announced the progress of the capital increase of China and South Korea Life, and planned to introduce five external investors, namely, Changxing Financial Control, Wenzhou Guojin, Wenzhou Electric Power, Wenzhou Jiaofa and Zhengyu Investment, with a total capital increase of about 1.8 billion for China and South Korea Life.
Jiangsu, Zhejiang and Shanghai is one of the most dynamic areas of China's private economy, providing the company with a good customer base. Zhejiang Province's GDP in 2021 is the fourth in the country, the per capita GDP is the fifth in the country, and the number of A-share listed companies is the second in the country. The wealth accumulation effect in Jiangsu, Zhejiang and Shanghai is significant, and the future development space of asset management business is huge. However, the company's financial subsidiaries have distinctive features and outstanding advantages. For example, Zhejiang Gold Trust began to layout the family trust business in 2018, and the market influence of "Family Business Dingfeng" family trust brand continues to improve. Prajna Wealth is one of the earliest wealth management institutions in China, and the active management scale of its five differentiated high-quality products in Hangzhou Jihai has increased six times in the past year; the "one mother and many children" management structure and market-oriented fund cooperation model of Oriental Industry and Finance have formed a professional and diversified fund business chain, effectively improving the efficiency of cross-asset allocation. Generally speaking, the company has basically formed a business closed loop with the main line of serving the regional economy and focusing on wealth management, and has made many efforts in the license plate layout, which has a bright future.
Valuation and investment advice: the financial industry is usually valued by PE or PB method, but Zhejiang Oriental is involved in more business sectors. For accuracy, we will adopt segment valuation method to determine the company's investment value according to different business attributes. According to the expected shareholding ratio after the completion of the restructuring plan, the reasonable market value of the company in 2022 is about 19.755 billion yuan, corresponding to the target price of 5.78 yuan, giving a "buy" rating for the first time.
Risk tips: the progress of licensed financial control strategy is not as expected; macroeconomic downside risks; cyclical fluctuations in financial business; capital market operation is not good.
