3Q20 performance is in line with our expectations
Aijian Group announced 1-3Q20 results: total operating income 3.02 billion yuan, year-on-year + 8.7%; return to the mother net profit 1.03 billion yuan, year-on-year + 0.4%; deduction of non-net profit 940 million yuan, year-on-year-12.0%, of which non-recurrent profit and loss are mainly government subsidy of 60.32 million yuan and entrusting others to invest assets profit and loss of 38.35 million yuan. Deducting the decline in non-net profit is mainly due to investment business income (investment income + fair value change profit and loss) from-81 to 60.54 million yuan compared with the same period last year. And the credit impairment loss turned from the impairment of the same period last year to 18.76 million yuan into the impairment loss of 63.94 million yuan (mainly due to the increase in the scale of self-financing loans of Aijian Trust and the corresponding impairment loss). In addition, the operating cost was + 17.6% to 880 million yuan compared with the same period last year. 1-3Q20 ROAE-1.0pptYoY to 9.2%.
3Q20 homing net profit is 370 million yuan, year-on-year / month-on-month-6.1% 0.6ppt/ 0.6%, corresponding to single-quarter ROAE year-on-year-0.6ppt/ month-on-month-0.1ppt to 3.3%, basically in line with our expectations.
Trend of development
3Q20 single-quarter trust business rebounded. The company's 1-3Q20 fee and commission net income was-11.2% to 1.07 billion yuan compared with the same period last year, of which 3Q20 single-quarter handling fee and commission year-on-year + 28.8% / month-on-month + 27.9% to 430 million yuan; interest income was + 89.4% to 710 million yuan compared with the same period last year, mainly due to the increase in the scale of self-operating loans of Aijian Trust and the increase in interest income of the consolidated structured main body. The investment income was-72.8% to 86.21 million yuan compared with the same period last year, mainly due to the decrease of investment projects in the structured main body of Aijian Trust.
Major shareholders increase their holdings to show confidence and buy back shares to strengthen employee incentives. On June 12, 2020, Aijian Group issued a "notice on the plan for shareholders to increase their shareholdings in the company", announcing that Junyao Group, a shareholder of the company, will increase its stake in Aijian Group by 0.1%. The plan will be completed on September 7, 2020. Junyao Group has a total increase of 0.3% of the company's shares, reflecting shareholders' confidence in the development of the company. In addition, Aijian Group issued a notice on September 30, announcing that it will buy back the company's shares by centralized bidding, with a total repurchase fund of 0.5-80 million yuan, which will be mainly used for employee equity incentives.
Economic stabilization superimposed leasing plate restructuring, leasing business is expected to usher in improvement. On August 29, 2020, the 10th meeting of the board of directors of Aijian Group approved that Aijian Lease, a wholly-owned subsidiary, should be restructured into a joint stock limited company by way of overall initiation. at present, the relevant restructuring work is under way. Subsidiary restructuring is another major change in Aijian Group's leasing sector after 1H20 Huarui Leasing was incorporated into Aijian Leasing. Relying on the new corporate governance and organizational structure after the restructuring, we expect that the operation of the company's leasing sector is expected to be improved.
Profit forecast and valuation
We maintain the 2020max profit forecast of 1.41 billion yuan / 1.49 billion yuan in 2021. The company is currently trading at 1.1x 2020e Pmax B, maintaining an outperform industry rating and target price of RMB9.8, corresponding to 1.3x2020e Pamp B, which has 19% upside compared to the current share price.
Risk.
Trust and leasing business growth and asset quality are lower than expected; regulatory uncertainty.