1Q24 results are in line with our expectations
The company's 1Q24 net profit/profit before provision was -3.0%/-5.2%/-3.4% year-on-year, and the performance was in line with our expectations.
Development trends
Revenue performance improved, and profit growth slowed. 1Q24 The year-on-year growth rate of the company's net profit/net profit before provision and operating income was -3.8ppt /+0.4pp/+0.3ppt compared to 2023, respectively. The company's revenue growth performance improved slightly, mainly due to better-than-expected interest spread performance. We estimated that the net interest spread for the first quarter increased by 2 bps compared to 4q23, while the decline in net handling fee revenue narrowed. The year-on-year growth rate was 4.9ppt higher than in 2023. Management said during the performance meeting that the good net fee revenue performance mainly came from third-party payment and investment banking business contributions. The slowdown in net profit growth was mainly affected by cost factors. The 1Q24 company's cost-revenue ratio increased slightly by 0.83ppt year-on-year, while the decline in asset impairment losses was narrower than in 2023.
Assets are expanding rapidly. In 1Q24, the company's total assets/loan size increased by 13.2%/11.6% year on year, and the growth rate increased by 0.4 ppt/down 0.8 ppt from 2023, respectively. The growth rate of the company's interindustry assets in the first quarter was faster, with a year-on-year increase of 43.4%. In terms of credit investment, the company's share of public loans at the end of the first quarter increased by 1.7ppt to 63.7% compared to the end of 2023. Credit investment was mainly for public loans. Management said at the performance meeting that the company increased credit investment in key areas such as new productivity, manufacturing, science and innovation strategies, and private sector inclusion to improve overall credit quality and efficiency.
Asset quality remains stable. At the end of the first quarter, the company's non-performing loan ratio was 1.36%, the same as at the end of 2023. The provision coverage rate was 216.3%, up 2.3 ppt from the end of 2023, and the overall asset quality and risk offsetting capacity remained stable. In response to the market's concerns about the quality of housing-related assets, the company's management stated during the performance meeting that the bad rate for public real estate rose slightly at the end of the first quarter compared to the beginning of the year, mainly affected by bad certification of some real estate projects and enterprises. Currently, the company's real estate loan LTV remains low, and the collateral value is sufficient.
Profit forecasting and valuation
Profit forecast for 2024/2025 was slightly lowered. Considering the company's prudent planning policy, we lowered the 2024E profit forecast by 2.5% to 356.9 billion yuan and the 2025E profit forecast by 3.1% to 36.7 billion yuan. The current A share price corresponds to the 2024/2025 0.5 times/0.5 times net market ratio, and the H share price corresponds to the 2024/2025 0.4 times/0.3 times net market share ratio. Keeping the target price of A shares unchanged at 6.75 yuan, corresponding to 0.6 times the 2024 P/B and 0.6 times the 2025 P/B, there is 25.4% upside compared to the current stock price, maintaining the industry rating. Keeping the target price of H shares unchanged at HK$5.52, corresponding to 0.6 times the 2023 P/B and 0.4 times the 2024 P/B, there is 31.4% upside compared to the current share price, maintaining the outperforming industry rating.
risks
Macroeconomic uncertainty and the spread of risks in the real estate industry.