PetroChina Capital is an integrated financial group controlled by Petrochina Company Limited Group. Its main business is financial companies and banks. It has outstanding characteristics of industry-finance integration and mainly serves Petrochina Company Limited-related customers. As spreads are under pressure and asset quality deteriorates, the company's weighted average ROE has continued to decline since restructuring and listing in 2016, from 10.72 per cent to 6.11 per cent in 2021. Based on our financial control company evaluation system, it is recommended to give an appropriate valuation discount, covering 2022 0.7xPB for the first time, with a target price of 5.40 yuan and a "hold" rating.
PetroChina Capital is an integrated financial group controlled by Petrochina Company Limited Group. CNPC held 77.35% of its shares at the end of 2021.
Through holding, participating in Kunlun Bank, CNPC Finance, Kunlun Financial Leasing, CNPC assets, exclusive Insurance, Sino-Italian property Insurance, Sino-Italian Life Insurance, Kunlun Insurance Brokerage, Bank of China Securities, BOC Xinzeng, Kunlun Capital and Kunlun Mathematical Intelligence, dabble in all aspects of comprehensive financial business. In 2016, the company went public as a whole through a major asset swap of oil fuel, which has lost money for two consecutive years.
The main business is mainly financial companies and banks. In 2021, the four businesses of banks, financial companies, financial leasing and trusts, mainly based on interest spreads, accounted for 92% of the company's total income, of which banks accounted for 41% and financial companies accounted for 38%. According to the main body of the consolidated sub-company, CNPC Finance, Kunlun Bank and Kunlun Financial Leasing contributed 98% of the company's total revenue in 2018-2021, 94% of the company's net profit and 72% of the company's net profit, which is the main source of the company's value.
The combination of industry and finance has outstanding characteristics, mainly serving Petrochina Company Limited-related customers. Petrochina Company Limited Group and its affiliated enterprises are the company's largest customers, accounting for 16% of total sales in 2021, 29% of total purchases, 14% of interest income, 32% of earned premiums, 34% of commission income, and 65% of total loans and advances.
The spread business came under pressure, asset quality deteriorated, and ROE fell to 6.11%. In 2021, the net profit of returning home was 5.55 billion yuan, down 29% from the same period last year. Among them, the net profit of financial companies fell by 19%, commercial banks fell by 13%, financial leasing increased by 9%, and trust business fell by 73%. While interest spreads are under pressure, the credit impairment of trust business increases due to the transmission of real estate risk. In addition, due to the expansion of business scale and the depreciation of the US dollar, the company increases its provision for credit impairment. The profit and loss statement of 2021 shows a credit impairment loss of 2.281 billion yuan and a reduction of 1.782 billion yuan in net profit. The company's weighted average ROE continued to decline from 10.72% in 2016 to 6.11% in 2021.
Based on the financial control evaluation system, it is necessary to give a valuation discount to comprehensive financial services. According to the trial measures for the Supervision and Administration of Financial holding companies, the company shall apply for the establishment of a financial holding company. Based on our financial control company evaluation system, taking into account the clear positioning of CNPC capital users, sound governance structure, but at the same time, multiple cross-coordination needs to be strengthened, capital utilization efficiency and ROE after financing need to be improved, it is suggested to give appropriate valuation discount.
Risk factors: the prosperity of the main investment industry has declined, and the quality of credit assets has declined sharply; the trust industry is facing transformation, and the underlying asset quality of products fluctuates; the sharp fluctuations in the market market bring about fluctuations in the return on investment in financial products; financial control platform internal control and policy exceed expected risks; industry competition tends to be fierce, policies continue to tighten risks.
Cover for the first time, giving a "hold" rating. It is estimated that the total operating income of the company in 2024 is 319,334 million yuan, an increase of 3%, 5%, 5%, respectively, and the net profit of return to the home is 100 million yuan in 58-62-64, an increase of 4%, 8%, 3%, respectively, and the net assets of the company are 969, 1014, 1059 billion yuan, respectively, and the corresponding diluted ROE is 6.0%, 6.2%, 6.1% respectively. The homing net profit forecast of the company 2022, 2023, and 2024 corresponds to the EPS forecast of 0.46, 0.49, 0.51 yuan, and the BVPS forecast of 7.67, 8.02, and 8.38 yuan, respectively. The current price corresponds to a PB of 0.66 Compact 0.63 Plus 0.60x. Considering that the main value of the company comes from the similar credit spread business, which is applicable to the PB valuation method; comprehensively considering the valuation discount given to the financial control, we give the company 2022 0.7xPB with a target price of 5.40 yuan, covering for the first time and giving a "hold" rating.