The 1Q24 results were in line with our expectations.
The company's 1Q24 net profit/profit before provision was -1.8%/-3.2%/-1.8% YoY, and the performance was in line with our expectations.
Development trends
The growth rate of revenue and net profit was slightly negative. 1Q24 The year-on-year growth rate of the company's net profit/net profit before provision was -6.0pp/ -1.3pp/ -1.8ppt in 2023, respectively. The slowdown in revenue and net profit growth was in line with our expectations. It was mainly affected by the decline in net handling fee revenue and other high base of non-interest income, while the cost-revenue ratio increased slightly year-on-year.
Interest spreads performed better than expected. The agricultural bank's net interest spread in 1Q24 was 1.44%, down 26 bps from the previous year, but our estimates showed that the net interest spread for the single quarter was basically flat compared to 4Q23. Considering the impact of loan repricing in the first quarter, the interest spread performance was better than we expected. The main reason was that debt cost control was better. We speculate that it mainly benefited from the drop in deposit cost pressure.
The pace of table expansion has slowed, and loans in counties and inclusive sectors have maintained high growth. The company's total assets/loans increased by 14.5%/12.9% year-on-year respectively in 1Q24. The growth rate decreased by 3.0 ppt/1.5ppt from 2023, respectively, and the pace of credit investment stabilized. Credit investment in the company's key areas remained active. County loans, inclusive finance, and inclusive small and micro enterprise loans increased 16.8%/40.0%/39.4% year-on-year respectively, and the growth rate was higher than the overall loan growth rate. The company continues to be deeply involved in county finance. The management said during the performance meeting that county loans are expected to account for about 50% of the annual increase, and we expect the profit contribution of the county business to continue to increase.
Profit forecasting and valuation
Profit forecast for 2024/2025 was slightly lowered. Considering the company's prudent provision policy, we lowered the company's 2024E net profit by 2.2% to 268.2 billion yuan, and the company's 2025E net profit by 2.5% to 272.8 billion yuan. The current A share price corresponds to 2024/2025 0.6 times/0.6 times P/B, and the H share price corresponds to 2024/2025 0.4 times/0.4 times P/B. Keep the target price of A shares unchanged at 5.14 yuan, corresponding to 0.7 times the 2024 P/B and 0.6 times the 2025 P/B. There is 16.5% upside compared to the current stock price, maintaining the industry rating. Keeping the target price of H shares unchanged at HK$4.40, corresponding to 0.5 times the 2024 P/B and 0.5 times the 2025 P/B, there is 23.1% upside compared to the current stock price, maintaining the industry rating.
risks
Economic recovery falls short of expectations, and real estate and local financing platforms are at risk.