Incident: On October 17, 2024, the Chongqing Agricultural Commercial Bank issued an announcement. Mr. Xie Wenhui resigned as chairman due to a job transfer, and the board of directors of the company promoted Mr. Sui Jun, the chairman of the company, to assume the position of chairman and legal representative in his place.

Mr. Xie Wenhui's appointment as chairman of Yufu Holdings will help strengthen cooperation with Chongqing's state-owned assets. According to the official website of Yufu Holdings, Mr. Xie Wenhui has served as its party committee secretary and chairman. Yufu Holdings is a Chongqing state-owned industrial capital investment and operation company with 38 actual control subsidiaries. It is also the largest shareholder of Chongqing Agricultural Commercial Bank. As of 24H1, the shareholding ratio was 8.70%. After this transfer, the cooperation between Chongqing Agricultural Commercial Bank and Yufu Holdings and its subsidiaries on the project side is expected to be further strengthened, which is beneficial to its asset investment. Governor Sui Jun has been working at the Chongqing Agricultural Commercial Bank for many years since 2008. He is familiar with the bank's business and development strategies, and has acted as chairman on his behalf, which is conducive to the smooth transition of the executive team.

Localized debt is gaining momentum, which is beneficial to improving asset quality, and is expected to open up space for table expansion. As a key debt conversion province, Chongqing is actively implementing a package of debt conversion measures. Recently, the Ministry of Finance clearly plans to introduce the strongest measures to support debt conversion in recent years. As of 24H1, Chongqing Agricultural Commercial Bank's share of broad infrastructure loans ranks first among listed agricultural and commercial banks, which is expected to fully benefit: First, the quality of related assets will be further guaranteed. Second, Minister Lan mentioned that this debt conversion measure “will greatly reduce the pressure on local debt, freeing up more resources to develop the economy”. In the longer term, after local debt pressure is reduced, more resources can be freed up for steady bank growth. Growth in asset investment.

The general outlook is good, and full-year results are expected to maintain an improving trend. As of 24H1, the cumulative year-on-year growth rate of revenue, PPOP, and net profit of the Chongqing Agricultural Commercial Bank increased by 1.6 pct, 1.0 pct, and 16.1 pct compared to 24Q1 to -1.3%, 6.5%, and 5.3%, respectively. Looking at the whole year, the performance improvement trend is expected to continue: 1) The strategy of the Cheng-Chongqing Shuangcheng Economic Zone and the new land and sea channel in the west continues to advance, compounded by strong debt policies, and asset investment support. 2) The debt cost advantage is strong. The 24H1 deposit cost ratio remains at the lowest level of listed agricultural and commercial banks, and will continue to benefit from the reduction in deposit listing interest rates.

3) Inventory has cleared up large public risks, and the suppression of reporting has subsided.

The year-on-year growth rate of the company's net profit for 2024/25/26 is 6.3%/5.6%/8.0%, EPS is 1.00/1.06/1.14 yuan, respectively, and BVPS is 10.95/11.75/12.62 yuan (maintaining the previous value). The current A share price corresponding to 2024/25/26 PB is 0.56/0.52/0.49 times. Comparatively, the 24-year PB adjustment average of the company is 0.60 times. Considering that the company is expected to benefit more from the acceleration of debt conversion and the possible strengthening of state-owned capital cooperation with Chongqing, the valuation premium was raised to 10%, corresponding to 0.66 times PB in 24, with a target price of 7.20 yuan/share, maintaining a “buy” rating.

Risk warning

Economic recovery fell short of expectations; demand for credit fell short of expectations; asset quality deteriorated.