The State Ten articles on Finance encourages private capital to enter the financial industry, which is beneficial to companies: on July 5, the State Council issued the "State Ten articles" on finance, encouraging private capital to enter the financial industry, and it is possible to liberalize the banking license. The company focuses on quasi-financial business, including pawnbroking, leasing, guarantee, entrusted loans and so on. It is the first listed company with similar financial business in A-shares. The introduction of this policy is good for the company.
It is still difficult for similar financial institutions to participate in banks in the short term: 1) the biggest difference between banks and similar financial institutions is that banks can absorb public deposits, and the security of deposits is related to social stability. It is expected that it will not be liberalized in the short term; 2) there are many legal restrictions on the establishment of banks in China, and if the law is not amended, the liberalization will be relatively weak. Therefore, it is still difficult for similar financial institutions to participate in the establishment of banks, and it has no impact on the company's income and profits in the short term.
Non-performing loans accounted for 23% of the company's loans at the end of 12 years, up from 11 years: in terms of the quality of corporate loans, at the end of 2012, suspicious loans accounted for 22%, loss loans accounted for 1%, the non-performing rate was high, and increased compared with the end of 2010 and 2011. The collateral of the loan business is mostly real estate and land, and after the customer is unable to repay the loan, negotiation or litigation will be carried out according to the situation. Since the beginning of this year, there has been an increase in the number of cases of recovery of loans through litigation, and there have been three so far.
Tight inter-bank liquidity, increased corporate business demand, increased risks: tight bank liquidity, financing difficulties for small and medium-sized enterprises, shortage of liquidity funds, will seek other financing channels, corporate business demand increases; but at the same time, in the case of tight bank liquidity, the macroeconomic situation is not optimistic, small and medium-sized enterprises are prone to problems in operation and cash flow, which increases business risks.
Corporate financial business accounts for 70% of the profits, currently focusing on the development of entrusted loan business: the company's main business includes financial and commercial aspects, of which pawnbroking, leasing, guarantee, entrusted loans and other financial business profits account for 70%. In the quasi-financial business, after the 2008 financial crisis, the pawn business accumulated more risks, and the company gradually controlled the scale of the pawnbroking business, focusing on the development of entrusted loan business. At present, the profit of entrusted loan business accounts for 55% of the profits of class loan business. At present, the term of the entrusted loan business is mostly one to one and a half years, with an upper limit of about 50 million and an annualized interest rate of 18%.
The company's 13PE32 times, 13PB2.3 times, the valuation is in a historically low position: as the entrusted loan business needs to use its own funds, if the company does not refinance or issue bonds, the business scale will remain basically stable. It is estimated that 2013 EPS0.29 yuan corresponds to PE32 times, 13 years BVPS3.94 yuan, corresponding to PB2.3 times.
The valuation level is higher than that of banks and lower than that of small and medium-sized brokerages, which is in the lower position of the company's valuation since 2009.
With the promotion policy of private finance, there are trading opportunities: the company's future business growth opportunities come from: 1) due to the tightening of bank liquidity and the financing difficulties of small and medium-sized enterprises, companies will rely more on other types of financial loans. Companies get more business space; 2) regulators liberalize private finance and promote the marketization of financial institutions (especially banks), and companies will enjoy the policy dividends brought by financial reform. Recently, with the promotion of private finance in the gold reform policy, there may be trading opportunities promoted by short-term policies. Give the target price 10 yuan, corresponding to 2013PE35 times, give the overweight rating.
The main uncertain factors are: (1) the risk of the company's loan business; (2) the promotion of private finance is not up to expectations.