Key investment points: Shanghai Agricultural Commercial Bank's 2023 revenue increased 3.07% year on year, net profit to mother increased 10.64% year on year; 24Q1 revenue increased 3.69% year on year, and net profit to mother increased 1.48% year on year. The company's technology-based enterprise loans continued to rise, deposit costs declined markedly, the core Tier 1 capital adequacy ratio increased to more than 14%, and the dividend ratio remained at 30%. We maintained the company's “superior to the market” rating.
The science and innovation finance label is getting brighter. At the end of 24Q1, the company's loan balance for technology-based enterprises reached 102.9 billion yuan, up 11.22% from the end of 23, accounting for 14% of total loans, accounting for about 1/4 of public loans, which is an important increase in loan growth. Technology-based enterprises with lenders are mainly concentrated in manufacturing, information transmission, software and information technology services, scientific research and technical services, etc., accounting for 56.42%, 16.49%, and 9.59%, respectively.
The transaction banking sector is making efforts to provide trade finance services to physical enterprises in Shanghai. In '23, the company built a new discount product, “Xinsecond Sticker”, and launched a new generation bill business system. The scale of direct bill posting increased 50% year over year, and 24Q1 bill discount increased 27% year over year in 23Q1.
Open up resources and save money, actively manage costs, and inclusive small and micro interest rates have rebounded. In 24Q1, the company's cost revenue decreased by 1.6 pct to 25.05% compared to the same period in '23. On top of the 6bps drop in deposit rate in '23 compared to '22, the interest rate on 24Q1 deposits continued to drop by 15bps compared to the end of '23. Interest rates on inclusive small and micro loans rebounded. The interest rate for newly issued inclusive small and micro loans was 4.06% in 24Q1, up 2 bps from the end of 23.
24Q1 accrued a large amount of impairment, or due to poor handling of individual loans in response to new risk regulations. In '23, companies accounted for a relatively large share of interest loans, mainly because they implemented the latest regulations on asset restructuring and interest loans in the “Commercial Banks' Financial Asset Risk Classification Measures”. The company's retail online loan volume in '23 was $56.341 billion, with a non-performing rate of 1.56%, up 0.62 pct from the end of '22.
Investment advice. We forecast EPS of 1.29, 1.36, and 1.44 yuan in 2024-2026, and net profit growth rates of 2.45%, 5.31%, and 6.30% to mother. We obtained a reasonable value of 8.31 yuan based on the DDM model; according to the PB-ROE model, the 2024E PB valuation was 0.65 times (0.56 times that of a comparable company), and the corresponding reasonable value was 8.42 yuan. Therefore, the reasonable value range is 8.31-8.42 yuan (corresponding to 2024 PE is 6.44-6.52 times, corresponding PE is 6.75 times for peer companies), maintaining the “superior to market” rating.
Risk warning: The solvency of enterprises has declined, asset quality has deteriorated dramatically; financial supervision policies have undergone major changes.