Investment points: the profit growth rate of Changsha Bank continues to improve in Q2, revenue remains high, and asset quality continues to improve. We maintain the "better than the market" rating of Changsha Bank.
Revenue growth remains high and profit growth has improved. The operating income of Changsha Bank increased by 12.12% in the first half of 2023 compared with the same period last year, of which the revenue of Q2 increased by 11.42% in a single quarter. The growth rate of net profit of Changsha Bank in the first half of 2023 was 10.61% compared with the same period last year. The profit growth rate of Q2 in the first quarter was 12.61%, which was significantly higher than the 8.68% of Q1.
All kinds of business will blossom more. The balance of county loans of Changsha Bank reached 161.541 billion yuan in the first half of 2023, an increase of 19.233 billion yuan or 13.52 percent over the end of 2022. Thanks to the development of county economy, Changsha Bank's business outside Changsha City in Hunan Province has developed rapidly, and its loan proportion has increased from 44.55% at the end of 2022 to 45.45% of Q2. In addition, the wealth management business of Changsha Bank is also developing rapidly. The asset management scale of 2023Q2 retail customers reached 365.915 billion yuan, an increase of 35.43 billion yuan, or 10.72%, over the end of 2022. The number of wealth customers reached 1.1005 million, an increase of 121100 over the end of 2022, an increase of 12.36%.
The quality of assets has improved slightly. The defect rate of Q2 of Changsha Bank in 23 years is 1.16%, which is the same as that of 23Q1, and the coverage rate of 23Q2 provision is 313.01%, which is slightly higher than that of 23Q1's 312.26%. The asset quality of Changsha Bank shows a trend of slight improvement.
Investment advice. We predict that the EPS from 2023 to 2025 will be 1.84,2.08,2.28 yuan, and the growth rate of net profit will be 13.48%, 12.31% and 9.22%. According to the DDM model (see Table 2), we get the reasonable value of RMB 9.83.According to the PB-ROE model, we value the 2023E PB of the company as 0.80x (0.64x of the comparable company), and the corresponding reasonable value is RMB11.99RMB. Therefore, the reasonable value range is 9.83-11.99 yuan (corresponding to 2023 PE 5.34-6.52 times, peer companies corresponding to PE 4.71 times), maintaining the "better than the big market" rating.
Risk hints: the solvency of enterprises has declined, asset quality has deteriorated significantly, and major changes have taken place in financial regulatory policies.