The mid-term dividend ratio increased compared to FY'23. The company announced the 2024 mid-term dividend plan, with a cash dividend of RMB 2.39 (tax included) for every 10 shares, with an interim dividend ratio of 33.07%, up from the 2023 dividend ratio (30.10%). We believe that the Shanghai Agricultural Commercial Bank has sufficient capital and moderate scale growth, and is capable of maintaining a 33% dividend ratio.

Net interest spreads are estimated to have remained flat month-on-month in a single quarter. We estimate that 24Q2's net interest spread for a single quarter was 1.49%, the same as 24Q1, mainly due to a decrease in the cost of interest-bearing debt. The company disclosed that the 24H1 interest-bearing debt cost ratio was 1.98%, down 7 bps from 2023; the deposit cost ratio was 1.83%, down 12 bps from 2023.

Among them, the cost ratio of unit current period/unit term/ personal time deposit decreased by 6 bps/14 bps/1 bp/25 bps compared to 2023, respectively.

The share of non-performing loans and the share of loans of interest declined month-on-month, while those with respect to public real estate both declined. The company's non-performing rate at the end of 24Q2 was 0.97%, down 2 bps from 24Q1; the share of concerned loans was 1.23%, down 4 bps from 24Q1.

The share of overdue loans increased by 5 bps to 1.31% compared to the end of 2023, mainly the share of newly overdue loans. The provision coverage rate decreased by 9.42pct from 24Q1 to 372.42%. The non-performing loan balance and non-performing loan ratio for public real estate loans both declined from the end of 2023, and the non-performing ratio decreased by 45 bps to 1.73%.

The growth rate of deposits and loans has been slowing month-on-month, and loans to technology-based enterprises are growing rapidly. 24Q2 corporate loans increased 6.18% year on year, and deposits increased 4.94% year on year, slightly slower than 24Q1. At the end of 24Q2, the company's loan balance for technology-based enterprises was 108.6 billion yuan, an increase of 30% over the previous year, accounting for 15% of the total loan amount. Among them, the suburban branch's loan balance for technology-based enterprises accounted for 70.49% of all technology-based enterprise loans. The company's science and innovation loan scale and number of customers rank among the highest in the Shanghai industry. It has comprehensively upgraded the Lingang Park Science and Technology Innovation Loan 4.0, vigorously promoted “intellectual property pledge financing” business development and model innovation, and actively implemented special products such as biomedical clinical loans and “Xindongneng” R&D loans.

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 8.65 yuan based on the DDM model; according to the PB-ROE model, the 2024E PB valuation was 0.65 times (0.55 times that of a comparable company), and the corresponding reasonable value was 8.42 yuan. Therefore, the reasonable value range is 8.42-8.65 yuan (corresponding to 2024 PE is 6.52-6.71 times, and the corresponding PE is 6.53 times for 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.