Incident: The company disclosed its 2024 mid-year report. 2024H1 achieved operating income of 0.59 billion yuan (YoY +7.2%), net profit of 0.38 billion yuan (YoY -26.6%), net profit of 0.35 billion yuan (YoY +6.7%), basic earnings per share of 0.19 yuan (YoY -26.6%), and a weighted average ROE of 6.7% (YoY-2.8pct).

Institutional distress asset management: achieve steady development and contribute core revenue. 2024H1, the company achieved revenue of 0.55 billion yuan (YoY +11.9%) from disposal of non-performing assets, accounting for 92.8% of revenue.

Looking at several major business areas:

1) Energy sector: Relying on the energy industry resource endowments of the affiliated group, as of 2024H1, the stock balance of the company's energy distressed asset projects reached 4.57 billion yuan, which is expected to contribute to the company's long-term stable restructuring income and cash flow.

2) Listed company sector: As of 2024H1, the balance of distressed asset projects of listed companies was 0.55 billion yuan, and several reserve projects are underway, which is expected to lay a solid foundation for steady growth in the company's performance.

3) Special opportunity areas: As of 2024H1, the company's special opportunity project stock balance was 2.293 billion yuan, and the balance continued to grow steadily. The company has established business contacts and cooperative relationships with many financial institutions, local AMC and unlicensed asset management companies, and has carried out comprehensive in-depth cooperation in the selection, packaging, acquisition and disposal of non-performing asset projects.

4) Commercial real estate sector: As of 2024H1, the stock balance of the company's commercial real estate distressed asset projects was 1.095 billion yuan, which remained stable. The company's commercial real estate is mainly distributed in Beijing, Chengdu, etc., and the overall risk exposure is relatively small. We expect that this type of business will continue to contribute more stable rental returns to the company and gradually achieve asset appreciation benefits.

Personal distress asset management: Exploring the blue ocean market has broad prospects for technological empowerment. From January to June 2024, the individual loan non-performing asset transfer package launched at Yindeng Center sold a total of 135 orders, +13% year-on-year, and the transaction amount reached 32.15 billion yuan, or +128% over the same period last year. Relying on AI technology and big data foundation, the company is continuously improving its comprehensive ability to dispose of bad personal loans. Currently, the company's share of bad asset management of personal loans is at the leading level in the domestic AMC market. Furthermore, the launch of the credit reporting system with the People's Bank of China in the first half of the year and the successful completion of the first credit reporting process for non-performing asset debtors of individual loans will also be expected to further enhance the company's comprehensive capabilities in evaluating bad credit and risk management for individual loans.

Investment advice: Maintain a “buy-A” investment rating. As the only A-share licensed enterprise specializing in AMC business, the company relies on shareholders' industrial background advantages and own resource endowments to deeply cultivate the difficult asset management market and create three major business lines of ToB side institutional distress asset management+ToC side personal distress asset management+focus on high-quality asset management in line with the country's industrial development direction. We expect the company's 2024-2026 EPS to be 0.73 yuan, 0.84 yuan, and 1.04 yuan respectively. The company will be given 8x2024 P/E, corresponding to a target price of 5.86 yuan for 6 months.

Risk warning: Stricter regulatory policies, increased industry competition, poor personal loan business development falls short of expectations, etc.