Jiangsu Leasing (600901) Comment Report: Performance Meets Expectations, Net Interest Margin Expands
Event: Recently, Jiangsu Leasing released its 2019 Interim Report, and the company realized its first operating income in the report14.
2.3 billion yuan, an increase of 20 in ten years.
21%; net profit attributable to mother 7.
86 ppm, an increase of 22 per year.
29%; ROE decreased by 0 compared with the same period last year.
16 up to 6.
Investment points: focus on emerging industries, increase the “factory financing”, and continuously optimize the asset side.
In 2017, after the company launched the “transition + growth” strategy, it continued to explore new sub-sectors. Currently, it is continuously adding weight to clean energy, high-end equipment, automotive finance, information technology, agricultural machinery and other fields.
In 2019H1, the number of release contracts in the aforementioned transformation business accounted for 98 of the total number of release contracts.
28%; the investment amount accounts for 55% of the total investment amount.
93%, an increase of 21 from last year.
In addition, the company also further promotes equipment financing leasing business under the manufacturer leasing model, and focuses on expanding the target manufacturer and dealer network.
As of the end of H1 2019, the number of manufacturers that the company cooperates with has reached 443 dealers (including Case New Holland, Heidelberg, Iveco and other Fortune 500 companies), which started to grow earlier6.
At the same time, the number of new financial lease contracts was 5,103, an increase of more than 100%, and the promotion of the “factory melting” model was very effective.
With the expansion of credit lines, the advantages on the fund side remain.
However, considering that the existing CBRC has objected to re-regulating the operation of multiple types of leasing entities, the advantages of financial leasing companies’ financing channels (interbank lending, financial bond issuance, and asset securitization) remain, and the company acts as an AAA gold leasing company, Capital advantage on the capital side.
In 2019H1, the company further expanded the credit line and obtained 1351 from 101 banks.
3.5 billion quota, an increase of 7.
31%, credit rate 25.
On the basis of abundant credit, combined with inter-bank borrowing, financial debt, asset securitization and other diversified channels, the company is expected to maintain a comparative advantage on the capital side in 2019.
The decline in interest rates caused the net interest margin to widen, and performance is expected to exceed expectations.
The company’s net interest margin level has been leading for a long time.
43%, significantly higher than the average of comparable listed companies2.
62% (see “Jiangsu Leasing (600901) In-Depth Report: The Interest Spread Leads the Bank, A-Share Pure Gold Leasing Target”).
In 2018, the company’s net interest margin was affected by the transformation pains and macroeconomic pressures and was distorted to 2.
90%, but 2019H1 has picked up to 3.
46%, an annual increase of 0.
54 averages, it is expected that the current overall interest rate decline in H2 in 2018 is preliminary.
We believe that the lease duration of the assets in the leasing industry is longer than the duration of funds. At the same time, considering the high proportion of fixed-rate contracts at the asset-production side, the yield is relatively rigid. Therefore, in the context of the decline in market interest rates, the cost of funds on the capital side will be higher than the yield on the asset sideThe adjustment will be realized as soon as possible, and the marginal positive net interest margin will expand.
At present, the impact of the downward interest rate on the company’s capital side has already appeared, and the continued expansion of net interest margin may bring performance beyond expectations.
Assets have grown steadily, and the NPL ratio is still low.
As of the end of 2019H1, the company’s total asset size was 645.
8.9 billion yuan, an earlier increase of 9.
42%; resistor budget 533.
8.9 billion yuan, an increase of 11.
The balance of non-company finance lease receivables was 625.
9.9 billion yuan, an increase of 7.
99%, interest-generating asset expansion is overall stable.
However, considering the downward pressure on the macro economy in H2 2019, the balance of long-term receivables of finance leases is expected to be higher than 17 in 2018.
79% fell slightly.
In terms of asset quality, the company benefits from the advantages of its partners in terms of channels and professional equipment, and has the ability 杭州桑拿 to control and dispose of leased properties, so asset quality is basically safe.
As of the end of 2019H1, the balance of the company’s non-performing financial lease receivables5.
2.7 billion yuan, with a non-performing financial lease asset ratio of 0.
84%, lower than the average level of the banking industry (the CBRC disclosed that 2019Q1 was 1.
8%); provision ratio of financial lease assets.
44%, provision coverage ratio of 408.
30%, the average leading CBRC red line, and the leading level in the industry.
Investment suggestion: In terms of 2019H1, Jiangsu Leasing will continue to optimize the asset-side structure and solidify the advantages of the fund-side. It will also expand its net interest margin against the background of continued downward interest rates and gradually show that it has exceeded expectations.
At the same time, the company’s risk control is effective, the interest-generating assets are expanding steadily and the asset quality is not worrying, and it strives to maintain stable and rapid development in the medium and long term.
We are optimistic about the company’s comprehensive strength and development potential as the only pure financial leasing target in the A-share market, and maintain the “overweight” rating.
The company’s EPS is expected to be 0 in 2019-2021.
70 yuan, corresponding to the current sustainable PB is 1.
Risk reminders: macroeconomic downside risks; growth in investment and financing needs, and the increase in non-performing ratios of receivable financing leases; interest rate fluctuations leading to narrowing of interest margins; term mismatches leading to increased liquidity risks