2023 results are in line with our expectations
The company's 2023 net profit/profit before provision was +0.8%/-5.6%/-3.7% YoY, 4Q23 net profit/profit before provision +0.9%/-2.3%/-4.3% YoY. The performance was in line with our expectations.
Development trends
The growth rate of revenue and profit remained stable. The year-on-year growth rate of the company's net profit/net profit before provision and operating income in 2023 was flat compared to 1-3Q23 /+0.7pp/ -0.2ppt, respectively. The profit growth rate rebounded before provision, mainly due to cost-side savings contributions, and management expenses decreased by 0.4% year-on-year. In 2023, the company's net interest income fell 5.3% year on year, and the net interest spread fell 6 bps to 1.61% from the previous three quarters. It is estimated that it was mainly affected by factors such as stock mortgage interest rate adjustments and the relative rigidity of debt costs. In 2023, the company's debt cost increased by 22 bps year on year, and deposit periodization had a big impact on debt costs. In 2023, the company's net handling fee revenue fell 7.7% year on year, and fell 15.0% year on year in the 4Q23 single quarter. Mainly affected by factors such as capital market fluctuations, changes in investor preferences, and public fund rate reforms, the revenue from financial management and custodian services declined.
The investment business contributed greatly to revenue. In 2023, other non-interest income increased 26.2% year-on-year, and the growth rate increased 9.4ppt from 1 to 3Q23.
Credit investment focuses on key areas. In 2023, the company's total assets increased 12.8% year on year, and loans increased 12.4% year on year. The growth rate increased 0.4 ppt/decreased 0.1 ppt respectively from the end of the third quarter, and credit investment remained positive. The company continued to increase its support for key areas such as green finance, manufacturing, inclusive finance, strategic emerging industries, technological innovation, and rural revitalization. At the end of 2023, the loan balance for the manufacturing industry was 3.8 trillion yuan, up 27.3% year on year; the loan balance for strategic emerging industries was 2.7 trillion yuan, up 54.1% year on year; the loan balance for inclusive small and micro enterprises was 2.2 trillion yuan, up 43.7% year on year; and the green loan balance was close to 5.4 trillion yuan, an increase of nearly 1.4 trillion yuan over the end of the previous year.
Profit forecasting and valuation
The profit forecast for 2024/2025 remains unchanged. Taking into account the company's adjusted revenue caliber, we lowered our 2024 revenue forecast by 7.1% to 804.7 billion yuan, and lowered our 2025 revenue forecast by 8.1% to 797.3 billion yuan, keeping our 2024/2025 profit forecast unchanged. The current A share price corresponds to the 2024/2025 0.5 times/0.5 times net market ratio, and the H share price corresponds to the 2024/2025 0.3 times/0.3 times net market ratio. Considering the adjustments in real estate and debt conversion policies, keeping the target price of A shares unchanged at 6.75 yuan, corresponding to 0.6 times the 2024 P/B and 0.6 times the 2025 P/B. There is 25.9% upside compared to the current stock price, maintaining the industry rating. The target price for H shares remains unchanged at HK$5.52, corresponding to 0.4 times the 2024 P/B and 0.4 times the 2025 P/B. There is 39.0% upside compared to the current stock price, maintaining the outperforming industry rating.
risks
Macroeconomic uncertainty and the spread of risks in the real estate industry.