Event: the company released its three-quarter report in 2019, with total operating income of 2.78 billion yuan, an increase of 53.1% over the same period last year; net profit of shareholders belonging to listed companies was 1.02 billion yuan, an increase of 25.0% over the same period last year; and earnings per share was 0.63 yuan per share.
Main points of investment
The company's net profit in the first three quarters of 2019 was + 25.0% compared with the same period last year, and the performance was in line with expectations. 1) the main business of Aijian Trust maintained steady growth (fee and commission income from + 14.7% to 1.21 billion yuan compared with the same period last year), of which the increase in trust plan income in the inherent business resulted in the company's investment income from + 240.9% to 320 million yuan compared with the same period last year. 2) the operating income of 2019Q1~3 reached 1.2 billion yuan compared with the same period last year, which was mainly due to the increase in income from Aijian's import and export business and the merger of Huarui Leasing. 3) the company has made great efforts to expand the team of the Trust Wealth Center, so that the salary of the staff and workers has increased by + 51.9% to 470 million yuan compared with the same period last year. The financial expenses caused by the increase in bank borrowing from the company and the issuance of corporate debt are + 135.5% to 200 million yuan compared with the same period last year. The company's business expansion in the first three quarters led to the growth of both the revenue side and the expense side, maintained steady development as a whole, and its performance was in line with expectations.
Trust and leasing business steadily contribute to performance, and multiple layouts create a comprehensive financial service system: 1) under the new regulations on capital management, the scale of channel and multi-tier nested business is constantly compressed, and the structure of trust business is constantly optimized. It is expected that the company's active management capacity will be enhanced, and the average annualized comprehensive trust return rate in 2019 will be significantly higher than that of last year (0.4% in the first quarter). 2) at the end of September 2018, the company was granted 100% equity in Huarui Leasing (with a net profit of 50 million yuan in the first half of the year) of Junyao Group, a major shareholder, to make up for the leasing areas such as aviation and spare engines, and superimposed Aijian financial lease. the leasing sector is expected to provide stable income for annual income growth. 3) the company has diversified financial layouts. At present, the company already has many financial subsidiaries, such as Aijian Securities, Aijian Trust, Aijian Leasing, Aijian Wealth, Aijian assets, etc., superimposing the industrial advantages of shareholder Junyao Group. The combination of industry and finance is expected to create a comprehensive financial service system to achieve the further development of the company.
Major shareholders continue to increase their holdings of Aijian, and asset operation efficiency is expected to improve: 1) Junyao Group has been increasing its holdings since 2019 and has accumulated 28.9% of the company's shares by the end of the third quarter. It also plans to increase its minimum stake of not less than 0.1% and a maximum of 0.5% of shares within six months from July 3, 2019, demonstrating shareholders' confidence in the company. 2) Junyao Group is mainly industrial investment, and has formed five major sectors: air transport, financial services, modern consumption, educational services and scientific and technological innovation. Aijian Group, as the core force of its financial sector, is expected to achieve business interconnection with other sectors and promote the common development of industry-finance integration. 3) the company adopts market-oriented incentives to attract a large number of excellent external teams to provide a talent basis for actively managing business transformation and the establishment of a direct marketing system. Recent applications for credit insurance funds will further reduce financing costs and improve asset operation efficiency. It is expected to contribute to the steady growth of trust performance.
Profit forecast and investment rating: corporate trust, leasing business stable contribution to performance, corporate profitability and operational efficiency may continue to improve, optimistic about the development potential of the company's comprehensive financial platform. It is estimated that the company's net profit in 2019 and 2020 will be 13.9 yuan and 1.68 billion yuan respectively, with a corresponding valuation of about 10.2 and 8.4 times, maintaining a "buy" rating.
Risk tips: 1) the active management of trust is not as expected; 2) the quality of leased assets is declining.