Shengye's 1H23 performance is in line with our previous expectations
Shengye announced 1H23 results: the company's 1H23 revenue was +28% year-on-year to 495 million yuan, and net profit was +4% year-on-year to 175 million yuan, in line with our previous expectations, mainly due to a year-on-year increase in the average balance of the company's supply chain financial assets.
Development trends
It covers a rich range of underlying asset classes, and the digital finance business is growing steadily.The company's digital finance business revenue (interest income+guarantee fee revenue) was +17% to 355 million yuan (accounting for ~ 72% of total revenue) in 1H23. Thanks to the fact that demand for direct financing in supply chain finance remains relatively strong, and the company leverages incremental capital through cooperation with high-quality local central enterprises, the average daily balance of supply chain financial assets in the company's 1H23 table is +20% to 7.9 billion yuan. Due to the rapid expansion of the company's business volume and the rapid increase in the scale of external loans, the company's 1H23 average loan interest rate was +0.8 ppt to 6.7% year on year, and the net interest spread (NIM) was -1.6 ppt to 3.7% year on year. Given the current macro environment, we think the company may focus more on relatively low-risk asset classes in the second half of this year, or cause its return on assets to decline.
Cooperation with high-quality local central enterprises is deepening, and the off-balance sheet asset light business is rapidly expanding.The company's 1H23 platform service revenue was +130% year-on-year to 67 million yuan, mainly due to the company's average off-balance sheet assets of +186% year-on-year to 4.7 billion yuan. Looking ahead, as the company further exploits its supply chain data/technology advantages to help micro, small and medium-sized enterprises move forward in financing nodes and deepen cooperation with high-quality local central enterprises to leverage more incremental capital, we believe that the company's future asset-light and inclusive matching business has great potential for development.
The industrial Internet and digital finance are expected to achieve a synergistic effect.The company's industrial Internet services mainly include innovative supply chain solutions such as smart construction sites and hospital SPDs. The company's 1H23 industrial Internet business revenue is 0.2 billion yuan. We believe that the main value of the company's industrial Internet business lies in the accumulation of data related to the industry supply chain and helping the company gradually improve its understanding of the supply chain in the medical and construction industries. Along with reaching cooperation with more core enterprises, it is expected that in the future, it will achieve synergistic effects with its digital finance business and platform integration business, and lay the foundation for the expansion of the company's asset scale. Profit forecasts and valuations were lowered by 10%/11% to 29/360 million yuan respectively due to a decrease in the company's return on assets and an increase in capital costs. The company is currently trading 15.4x/12.2x 23e/24e P/E. The target price was lowered by 9% to HK$6.64 (based on 20.5x 23e P/E), maintaining an outperforming industry rating, with 33% room for growth.
risks
Demand recovery fell short of expectations; the company's new business development fell short of expectations; asset quality fluctuated greatly.