Key points of investment
Incident: Hyde shares released its 2023 annual report and 2024 quarterly report. The company achieved revenue of $1,235/345 million in the first quarter of 2023 and 2024 respectively, or +15.69%/+13.16% year over year; net profit to mother was 888/233 million yuan, respectively, +25.68%/+21.49%.
The poor layout of individual loans has been improved at an accelerated pace to create a long board of misplaced competition: 1) The revenue from the bad individual loan business is gradually increasing. In August 2022, the company quickly entered the blue ocean market of poor personal loans through capital increase holding in Tibet Junfeng, and used big data+AI technology to form a full-chain, intelligent disposal capability, and took the lead in related fields. Currently, the company's personal loan non-performing business focuses on personal credit non-performing assets such as personal consumer credit loans, credit card overdrafts, and personal business credit loans that have been classified as bad, and is exhibited through fiduciary asset management and asset acquisition management. In 2023, the company's fintech service revenue (mainly bad personal loans) increased 72% year-on-year to 60 million yuan. 2) The layout of the personal loan industry chain continues to deepen. In 2023, Hyde Asset Management, a subsidiary of the company, gave full play to its license advantages and professional asset management capabilities, and cooperated with institutions such as Great Wall Equity Fund, Suzhou Asset, Beijing Guotong Asset, Shandong Railway Investment, and Shandong Airport Capital to establish private loan non-performing asset partnerships. By the end of 2023, the company had acquired a total of 29 non-performing personal loan projects using its own funds or partnerships, with a debt principal of about 10.6 billion yuan, debt principal and interest of about 18.3 billion yuan, and consideration of 800 million yuan, involving more than 620,000 debtors. Among the five major AMCs and 60 local AMCs in the country, the market share was at the leading level in the industry.
The institutional distress asset management business remains stable, and the “ballast stone” role is remarkable: the institutional distress asset management business is the company's cornerstone business. In 2023, the company achieved revenue of 1,112 billion yuan from disposal of non-performing assets, +8% over the same period last year, accounting for 90% of revenue. As of the end of 2023, the balance of the company's energy, special opportunity, commercial real estate, and listed company distressed asset projects was 47.7/18.7/11.0/ 6.3 billion yuan respectively, accounting for 57%/22%/13%/8% of the company's institutional distressed asset management business stock balance, respectively. 24Q1 The company's overall revenue continued to grow, and revenue from the institutional crisis asset management business is also expected to increase steadily.
Continue to stabilize dividends and actively give back to investors: Along with stable operations, Hyde Co., Ltd. has previously implemented cash dividends for two consecutive years. Cash dividends of 287/571 million yuan were distributed in 2021 and 2022 respectively, with a cash dividend ratio of 75%/82% respectively. In 2023, the company responded positively to the requirements of “strengthening cash dividends for listed companies” in the new “Nine Rules” and plans to distribute a cash dividend of 573 million yuan, with a cash dividend ratio of 65%. The closing price on April 24, 2024 corresponds to a static dividend rate of 4.75%, demonstrating the company's full confidence in long-term development.
Profit forecast and investment rating: Based on the company's performance in the first quarter of 2023 and 2024, we adjusted the 2024-2025 net profit forecast to RMB 1,083/1,297 billion (previous values were RMB 15.72/2.090 billion, respectively), with year-on-year growth rates of 23.03%/19.83%, corresponding to the 2024-2025 EPS adjustment to 0.80/0.96 yuan; the company's net profit to mother is expected to reach RMB 1.50 billion in 2026, corresponding to a year-on-year growth rate of 15.67% EPS is 1.11 yuan. The current market value corresponding to 2024-2026 PE is 11.13/9.29/8.03 times, respectively. We are optimistic that the company will rely on the first-mover advantage of the bad personal loan business to open up room for growth and maintain a “buy” rating.
Risk warning: 1) Bad personal loan business expansion falls short of expectations; 2) Stricter regulations inhibit industry innovation.