Core investment logic: 1. The Chongqing Agricultural Commercial Bank has a low cost advantage on the debt side. The interest rate on deposits in 2023 is 1.88%, the lowest among listed commercial agricultural commercial banks. The reason behind this is: deep cultivation of Chongqing's vast region, scale advantage and branch customer base advantage. 2. Low-cost debt makes them have a low operating risk appetite. The public customer base is mainly in the political, credit, and industrial categories; the retail customer base is mainly small and micro, with sufficient collateral. 3. We expect that the asset quality of the Chongqing Agricultural Commercial Bank will remain stable. On the one hand, it will have regional beta where Chongqing's economy is stable and improving, and on the other hand, it will enjoy individual stock α brought about by the company's low risk appetite.

4. Stable asset quality guarantees the characteristics of the Chongqing Agricultural Commercial Bank's medium- to long-term high dividend rate. We recommend it.

The debt-side cost advantage is significant. Chongqing Agricultural Commercial Bank has a deposit interest rate of 1.88% in 2023, the lowest among listed urban commercial and agricultural commercial banks; structurally, the reasons behind it: 1. Deeply involved in the vast area of Chongqing: Chongqing has a large area, large population, but internal development is uneven and hierarchical; 2. Scale advantage: The company is the first agricultural commercial bank in China to achieve A+H listing. The asset scale ranks first among domestic agricultural and commercial banks, and has the advantage of specific volume and location decline; 3. Advantages: The company's Local advantages, such as the number of outlets and market share of deposits and loans, are obvious (especially in counties).

Regional characteristics and its own business characteristics have brought a large retail customer base and deep customer reach to Chongqing agriculture.

The overall risk appetite on the asset side is low. 1. The low cost debt of the Chongqing Agricultural Commercial Bank makes it operate with a lower risk appetite. On the one hand, it is reflected in its low loan yield, its return on loans and assets at a low level in the industry (4.38% loan yield in 2023), and on the other hand, it is reflected in its public and retail customer base. 2. For the public customer base: Mainly the political, credit and industrial categories, which correspond to the two major strategic plans of Chongqing City, respectively. These two key strategic plans have a high level of policy, a long time span, large investment scale, guaranteed development prospects, and relatively low risk.

3. Retail customer base: Mainly small and micro, with sufficient collateral; Chongqing agriculture has its own unique moat scale and business model advantages in terms of small and micro business. They choose projects with relatively low risk and sufficient collateral, and the collateral value covers the loan principal amount by 1.77 times.

Asset quality is expected to be stable: on the one hand, there is a regional beta where Chongqing's economy is stable and improving, and on the other hand, it enjoys individual stock α brought about by the company's low risk appetite. 1. The burden of the company's bad history is gradually being cleared. The Chongqing Agricultural Commercial Bank has stepped up its write-off efforts in recent years. Large risks have basically been cleared, bad and attention rates have continued to decline, and asset quality indicators have continued to improve; 2. The redevelopment of Chongqing's regional economy to ease pressure; Chongqing's two key construction projects and the “33618 Industrial Plan” will help Chongqing's economy reach the next level from the two dimensions of “government credit” and “industry”; its economy has broken out of its trough, and it is expected that the business situation will gradually improve; 3. The company's low-risk customer base guarantees the quality of its assets:

For government and credit loans, the share of state-owned shareholders of the Chongqing Agricultural Commercial Bank is high, and the CITIC credit granting platform is also relatively high. Credit grants from district and county platforms are relatively distributed in districts and counties where debt pressure is low, and overall there is less pressure from chemical bonds; the customer base for retail loans is of high quality, and loan collateral is sufficient.

Investment advice: high-dividend varieties, highly recommended. Company 2024E, 2025E, 2026E PB 0.46X/0.43X/0.40X; PE 5.00X/4.76X/4.55X; dividend ratio 6.13%/6.44%/6.74%. The profitability of the Chongqing Agricultural Commercial Bank began to rise steadily, with stable historical dividends and high dividend ratios. It has the characteristics of high dividends+high dividends, stable asset quality, and guarantees the medium- to long-term high dividend rate of the Chongqing Agricultural Commercial Bank. We have upgraded the company to a “buy” rating and we recommend active attention.

Risk warning: First, the risk that the economic downturn exceeds expectations: Bank operations are highly related to macroeconomics. If the economic downturn exceeds expectations, it may cause the company's performance to fall short of expectations. Second, there is a risk that public data used in research reports may be delayed or not updated in a timely manner: some data in research reports comes from company regular reports and other public data, and there is a risk that information will be delayed or not updated in a timely manner. The third is the risk of measurement bias: The estimates of scale growth and profit forecasting covered in this report all contain certain assumptions, and there is a certain risk of measurement bias.