Dongguan Agricultural and Commercial Bank ploughs Dongguan, based on the development of Dawan District, has broad market prospects, solid customer base management, sound business development and solid asset quality.
Company profile: based in Dongguan, regional collectivization development. 1) Historical evolution: the first listed financial institution in Dongguan. Dongguan Agricultural and Commercial Bank, formerly known as Dongguan Rural Credit Cooperation Association, completed the joint-stock reform and formally registered in 2009. In September 2021, the company was listed on the Stock Exchange of Hong Kong. 2) ownership structure: relatively scattered, mainly shareholders of local private enterprises. The company's main shareholders are mainly local private enterprises, from industrial investment, hotel, catering, manufacturing and other industries. Fumin Development Co., Ltd. controlled by Dongguan SASAC holds 1.83%. 3) Management: rooted in the mainland, rich in management experience. The senior management team of Dongguan Agricultural and Commercial Bank has been in the financial system of Guangdong Province for a long time and has an in-depth understanding of the local banking environment, which is helpful for the company to develop local business. 4) operating location: based in Dongguan, developing to regional collectivization. The company has initially formed a new regional collectivization development pattern of "one body and two wings" with Dongguan as the center, Guangdong-Hong Kong-Macau Greater Bay Area as the main body and eastern and western Guangdong as the two wings, with broad market prospects.
Business highlights: solid customer base management, steady business growth. 1) customer group management: focus on the "three three" core customer groups and create a "1-3-3-N" grid model. The company vigorously promotes the "three three" core customer management project, focusing on the customer groups such as "modern agriculture, rural areas and farmers", advanced manufacturing "three chains" and small and medium-sized enterprises "three innovation", and innovates and implements the "1-3-3-N" grid marketing service model. 2) Business growth: credit and retail AUM growth is steady. Credit: since 2019, the total loan scale of Dongguan Agricultural and Commercial Bank of China has maintained an annual growth rate of more than 14%. In the past two years, the company has reduced the proportion of discount business increment, vigorously developed public loans, 2021-2022H contributed more than 80% of the total loan increment, and the company has sufficient capital to support sustainable business expansion. Retail Aum: the company's wealth management business continues to develop. In the first half of 2022, the average annual retail AUM reached 253.167 billion yuan, an increase of 12.34% over the same period last year. Among them, the company's private banking business started earlier and developed actively. By the end of the first half of 2022, the private bank AUM reached 47.524 billion yuan, an increase of 9.73% over the end of last year.
Financial analysis: there is room for improvement in interest rate spreads and consolidation of asset quality. 1) net interest margin: the debt side is better, while the asset side still has room for improvement. The company's net interest margin of 1.88% in the first half of 2022 gradually narrowed the gap with the average net interest margin of listed agricultural and commercial banks after 2018. On the interest-bearing liability side, the personal deposit current rate is obviously ahead of the industry to bring cost savings; on the interest-bearing asset side, under the trend of asset structure optimization, there is room for improvement in the performance of the rate of return on corporate interest-bearing assets. 2) Asset quality: tamping the asset quality and the level of provision. The overall asset quality of the company showed a trend of improvement. by the end of the first half of 2022, the company's non-performing loan ratio was 0.84%, which was already at the excellent level of listed agricultural and commercial banks; the provision coverage rate was 390.34%, and the "loan ratio-bad ratio-concern rate"
0.69%, with a strong ability to offset risks. 3) ROE: better than A-share listed Agricultural and Commercial Bank. The company's higher ROA supports ROE, in which interest expenditure and credit cost are better, non-interest income and expense control are in the middle level of listed agricultural banks, while interest income is weaker than the average level.
Risk factors: macroeconomic growth is falling faster than expected, asset quality is deteriorating significantly; net interest margin is falling faster than expected; regional economic development is not as expected; regional inter-industry competition is intensified; and uncertain risks brought by local epidemics.
Conclusion: Dongguan Agricultural and Commercial Bank ploughs Dongguan, based on the development of Dawan area, has broad market prospects, solid customer base management, sound business development and solid asset quality. We predict that the company's annual EPS in 2022-23-24 will be RMB0.90 / RMB1.00 / RMB1.12, and the current H share price corresponds to the 2022 0.88xPB.