Key points of investment

Jiangsu Golden Rental released its 2024 three-quarter report, and 2024Q1-Q3 achieved revenue of 3.959 billion yuan, +8.76% over the same period last year. Achieved net profit of 2.227 billion yuan to mother, +9.12% YoY.

Performance growth rate further improved, and profitability improved slightly

2024Q1-Q3's revenue and net profit to mother were +8.76% and +9.12%, respectively, and the growth rates were +0.29pct and +0.32pct, respectively, compared to 2024H1. The company's revenue growth rate increased marginally, mainly due to: 1) The company's net interest revenue performance was good. 2024Q1-Q3's net interest income was +6.79% year-on-year, and the growth rate was +0.09pct compared to 2024H1. 2) Operating lease revenue performance was good. 2024Q1-Q3's operating lease revenue was 0.086 billion yuan, +180.78% over the same period last year. Net profit growth rate increased marginally and the improvement was greater than revenue, mainly due to a decrease in credit costs. Our estimated credit cost ratio for 2024Q1-Q3 companies is 0.58%, compared to 2024H1 -13bp. Looking at ROE, 2024Q1-Q3's annualized ROE is 15.83%, which is an increase in profitability compared to 2024H1 +0.43pct.

The main business operation is steady, and the net profit margin is resilient

2024Q1-Q3 achieved net interest income of 3.895 billion yuan, +6.79% YoY. In terms of volume, by the end of 2024Q3, the company's financial leasing assets reached 127.939 billion yuan, +12.30% over the same period. The growth rate was 2024H1+1.12pct. Overall, the growth rate was relatively rapid. We expect to continue to invest mainly in clean energy, agricultural equipment, and modern services. In terms of price, the net profit margin for 2024Q1-Q3's leasing business was 3.67%, slightly -1 bp compared to 2024H1. The net profit margin showed strong resilience. Overall, the volume and price performance of the company's main business is very steady.

According to our estimates, 2024Q1-Q3's return on assets was 6.72%, which is basically the same as the earnings level in the first half of the year.

Significant improvement in attention rate

As of the end of 2024Q3, the company's defect rate and concern rate were 0.92% and 3.04% respectively, +2bp and -35bp, respectively, compared to the end of 2024H1. There has been a slight increase in the non-performing rate. We expect mainly the non-performing rate of micro, small and medium-sized enterprises to rise. The company is concerned that the + defect rate has improved dramatically by 33 bps, and asset quality has improved markedly. We expect the company to actively slow down growth in the current environment to control risk. In terms of provision, the company's provision coverage rate at the end of 2024HQ3 was 426.01%, compared to -5.21pct at the end of 2024H1, but the level of provision is still high. Looking ahead, the company's business development capabilities, risk control capabilities, and fintech capabilities all have obvious advantages, and asset quality is expected to remain stable in the future.

Investment advice: maintain Jiangsu Golden Rent's “buy” rating

We expect the company's revenue for 2024-2026 to be 5.182/5.582/6.025 billion yuan, with year-on-year growth rates of +8.25%/+7.72%/+7.94%, and 3-year CAGR of 7.97%; net profit to mother of 2.883/3.106/3.354 billion yuan, respectively, with year-on-year growth rates of +8.39%/+7.72%/+7.98%, and 3-year CAGR of 8.03%, respectively. Considering the company's excellent business model, leading risk control capabilities, and high dividends, it maintains a “buy” rating.

Risk warning: Steady growth falls short of expectations, deteriorating asset quality, and regulatory policy shifts.