Revenue and profit increased, and profitability declined. The company achieved total revenue of 38 billion yuan in 2023, an increase of 3.8% year on year; in 2023, net profit attributable to common shareholders of the parent company was 6.2 billion yuan, an increase of 1.0% year on year. The 2023 weighted average ROE was 13.0%, down 1.1 percentage points year over year.
The size of assets remains stable. At the end of 2023, the company's total assets increased 1.3% year on year to 351.5 billion yuan, and the scale remained stable. Among them, loans and accounts receivable increased 1.4% year on year to 270.8 billion yuan. The “2023 China Leasing Industry Development Report” shows that the balance of national financial leasing contracts fell 3.6% year on year in 2023. The entire industry is in a contraction stage, and Yuandong Hongxin's performance is slightly better than the overall level of the industry.
The return on interest-bearing assets and the cost of debt have both increased, and net interest spreads have declined slightly. The company's average yield on interest-bearing assets in 2023 was 8.24%, up 24 bps year on year, mainly due to stable customer base coverage and increased promotion of comprehensive financial services to maintain high yield pricing. The average cost ratio of the company's interest-bearing debt in 2023 was 4.26%, an increase of 20 bps over the previous year. The main reasons include overseas interest rate hikes, rising interest rates in the bond market, etc., while interest rates on domestic bank loans have declined. The company's net interest spread in 2023 was 4.58%, a slight decrease of 9bps year over year.
The industrial operation sector is growing relatively fast, and gross margins have remained stable. The company's revenue from the industrial operation division increased 11.4% year on year to 14.7 billion yuan in 2023. Among them, Hongxin C&D's revenue increased 22.0% year on year, and under a comparable scale, Hongxin Health's revenue increased 15.5% year on year. The gross profit margin of the industrial operation sector in 2023 was 32%, which remained stable year-on-year.
Sales and administrative expenses increased markedly. The company's sales and administrative expenses increased 19.6% year on year to 8.1 billion yuan in 2023. The growth rate was significantly faster than the revenue growth rate. The share of operating income increased 2.8 percentage points to 21.4% year on year. The main reason was that the company adopted an active market expansion strategy to promote business growth.
Asset quality is stable, moderate and improving. The company's defect rate at the end of 2023 was 1.04%, down 0.01 percentage points from the beginning of the year; the attention rate was 5.97%, down 1.03 percentage points from the beginning of the year. The bad generation rate in 2023 was 0.51%, a decrease of 0.06 percentage points year over year. The provision coverage rate at the end of 2023 was 228%, down 12 percentage points from the beginning of the year, and the credit cost ratio fell 0.38 percentage points to 0.13% year on year.
Investment suggestions: Taking into account factors such as the contraction of the overall scale of the industry and increased competition, we expect net profit from 2024-2026 to be 63/65/67 billion yuan (the previous forecast value for 2024-2025 was 69/7.4 billion yuan), a year-on-year growth rate of 1.8/3.5/ 2.3%; diluted EPS is 1.46/1.51/1.55 yuan; the current stock price corresponds to PE 3.9/3.8/3.7x, and PB is 0.45/0.42/0.39x. The company has a high dividend ratio. We maintain a “buy” rating.
Risk warning: The weakening macroeconomic situation may adversely affect the quality of the company's assets.