Key investment points: Agricultural Bank's revenue has maintained positive growth, the performance growth rate is showing resilience, the business scale continues to grow, the asset structure continues to be optimized, asset quality is stable, and the rating of “superior to the market” is maintained.
Revenue has maintained positive growth, and the growth rate of performance has shown tenacity. Agricultural Bank's revenue in 2023 was +0.03% YoY, and net profit to mother +3.9% YoY. The year-on-year revenue growth rate increased 0.6 pct from 23Q1-3. Credit impairment losses decreased by about 9.6 billion dollars year over year, contributing the most to profit growth.
The scale of the business continues to grow, and the asset structure continues to be optimized. Total assets in 2023 were +17.5% year-on-year, and total principal loans and advances were +14.4% year-on-year, with core assets maintaining reasonable growth. Manufacturing loans increased 28% from the end of the previous year, and loans in the inclusive finance sector increased 37% from the end of the previous year. The loan balance for inclusive small and micro enterprises increased by 689.328 billion yuan from the end of the previous year, an increase of 39%, higher than 24.6% of the entire industry. The total deposit amount was +15.0% compared to the end of the previous year. Among them, the deposit balance of individual customers was 17.11 trillion yuan, an increase of more than 2 trillion yuan, and the balance and increase remained the highest in the industry. The deposit balance for public customers was 10.48 trillion yuan, an increase of 1.44 trillion yuan. The increase and growth rate were leading among comparable peers.
Asset quality is stable, and provisions are sufficient. The defect rate fell 2 bps month-on-month to 1.33%. The attention rate decreased by 2 bps to 1.42% compared to 23Q2, and the provision coverage rate was -0.25pct to 303.87% month-on-month, leading the industry ahead of comparable peers, showing good risk resilience.
Investment advice. We forecast EPS to be 0.73, 0.78, 0.83 yuan in 2024-2026, and net profit growth rates of 0.90%, 6.47%, and 6.70%. We obtained a reasonable value of 5.81 yuan based on the DDM model; according to the PB-ROE model, the 2024E PB valuation was 0.70 times (0.53 times that of a comparable company), and the corresponding reasonable value was 5.17 yuan. Therefore, the reasonable value range is 5.17-5.81 yuan (corresponding to 2024 PE is 5.96-7.99 times, corresponding PE is 5.35 times that of the same company), maintaining the “superior to the market” rating.
Risk warning: The solvency of enterprises has declined, asset quality has deteriorated dramatically; financial supervision policies have undergone major changes.