2023 revenue generally met our expectations and profit fell short of our expectations
The company's revenue for 23 years was +10% to 4.79 billion yuan, which was basically in line with our expectations. Profit was +10% to 2.66 billion yuan, slightly lower than our expectations. Mainly due to increased operating expenses and increased year-end provision coverage, the company's annualized ROAE was -0.1ppt to 15.8% year over year; corresponding to 4Q23 single quarter profit +6% YoY /-14% month-on-month to 620 million yuan. 1Q24 revenue +6%/+12% YoY to 1.28 billion yuan, profit +5%/+15% YoY to 710,000 yuan, corresponding to 3.87% ROAE per quarter. The company continues to strengthen shareholder returns, with a dividend of 3.2 yuan per 10 shares in 2023, a corresponding dividend ratio of +8ppt to 51%, and a dividend rate of 5.9% corresponding to the current stock price. The “high dividend+steady growth” attribute is remarkable, and we continue to be optimistic about the company's allocation value.
Development trends
The “3+N” launch layout is progressing steadily; the “retail+direct leasing” characteristics are in line with the regulatory orientation. At the end of 2023, the company's financial lease receivable balance was +10% YoY to 114.1 billion yuan, market share +0.24ppt to 2.02% YoY; 1Q24 financial lease receivable balance +10% YoY/+6% YoY to 121.3 billion yuan. Specifically: 1) In terms of industry layout, the company is steadily advancing investment based on the “3+N” business layout. Among them, the leasing balance of clean energy and high-end equipment in key areas increased by 29%/39% year on year, respectively; 2) In terms of investment targets, the number of small, medium and micro customers in the company accounted for more than 99% at the end of the year, and retail characteristics were remarkable. At the same time, the direct leasing ratio was +22% year-on-year, and the direct leasing ratio was leading by the industry; 3) In addition, the company's manufacturer/regional channels continued to expand, and the number of the company's partner manufacturers increased by 29%/39% year on year, respectively; 3,613 homes, year round The balance of financial leases receivable in Jiangsu increased 26% year over year to 33.3 billion yuan.
Interest spreads continued to expand in 2023; 1Q24 financing costs are seasonally affected, and follow subsequent interest spread trends.
2023 annualized net spread (company caliber) /net interest spread (based on estimates) +0.2ppt to 3.76%/4.56% yoy; 1Q24 annualized net spread/ -0.2ppt to 3.63%/4.28% yoy. Looking specifically at 1Q24 (data based on our estimates): 1) The yield on financial leasing assets was basically flat at 6.8% year over year; 2) financing costs were +0.1ppt to 3.09% year over year, or mainly due to the banking industry's demand for investment in industrial assets at the beginning of the year, which boosted interbank lending interest rates, and the company also had “good start” characteristics of intensive investment at the beginning of the year. Looking ahead, benefiting from the loose monetary policy and the current continuous decline in interest rates in the interbank lending market, we believe that the company's subsequent financing costs may enter a downward trend.
Supported by multiple risk control capabilities, asset quality remains stable. At the end of 2023, the company's defect rate was flat at 0.91% year on year, and provision coverage rate was -9ppt to 448% year on year; the 1Q non-performing rate was also the same as at the beginning of the year, and provision coverage rate was -6ppt to 442%. In the face of macroeconomic uncertainty, the quality of the company's assets remains steady, and its preparation policy continues to be prudent. The company relies on diverse industry and regional distribution, a “leased+tenant+manufacturer” three-in-one risk control system and a leading comprehensive digital risk control system to provide strong support for steady operation.
Profit forecasting and valuation
Considering the uncertainty of the external environment, we reduced our 24-year/25-year profit by 6%/10% to 2.94 billion yuan/3.23 billion yuan. The company currently trades at 1.21x/1.09x 24e/25e P/B. Maintain an outperforming industry rating and target price of 5.6 yuan (corresponding to 1.26x/1.13x 24/25e P/B and 4% upside).
risks
Asset investment fell short of expectations, interest spreads narrowed more than expected, and asset quality fell short of expectations.