1H19 revenue +44.2%; net profit +11.1%. Efforts to develop MSE & Retail customers paid off. Average yield of IEA increased 0.64ppt YoY to 7.32%. NIS increased 0.70ppt YoY to 2.71%. NIM decreased 0.03ppt YoY to 3.24%. NPA ratio only slightly increased 0.02ppt from YE18 to 0.96%. We adjust 2019E revenue down 4.3%, net profit down 15.6%, and trim TP to HK$ 1.91. Maintain BUY.
- 1H19 revenue +44.2%; net profit +11.1%. The Company announced 1H19 results. Total revenue increased 44.2% YoY to RMB 3,539mn, of which finance lease income increased 39.6% YoY to RMB 2,360mn, representing 67% of total revenue. Net profit increased 11.1% YoY to RMB 675mn, representing 42% of our original full-year estimates. NIM decreased 0.03ppt YoY to 3.24%. NPA ratio slightly increased 0.02ppt from YE18 to 0.96%.
- Efforts to develop MSE & Retail customers paid off. Balance of interest earning assets (IEA) increased 10.9% from YE18 to RMB 78.3bn. Average yield of IEA increased 0.64ppt YoY to 7.32%, driven by the efforts of the Company to expand its asset toward transportation & logistics, as well as to develop micro- and small-sized enterprise (MSE) and retail customers. Interest income increased 35.3% YoY to RMB 2,724mn. Though average cost of IBL decreased 0.05ppt YoY to 4.61%, balance of interest bearing liabilities (IBL) increased 7.6% from YE18 to RMB 62.9bn, driving interest expenses to increase 22.1% YoY to RMB 1,206mn. NIS increased 0.70ppt YoY to 2.71%. NIM decreased 0.03ppt YoY to 3.24%. Despite increasing MSE and retail customers, NPA ratio only slightly increased 0.02ppt from YE18 to 0.96%.
- Catalysts. (1) Increasing efforts of the Company to expand its asset toward transportation & logistics, as well as to develop micro- and small-sized enterprise (MSE), and retail customers drive average yield of IEA up. (2) Stable average cost of IBL outlook in 2H19.
- Valuation. We adjust 2019E revenue down 4.3%, net profit down 15.6%, and trim TP to HK$ 1.91. Our TP corresponds to 1.0x 2019E P/B. The Company currently trades at 0.8x 2019E P/B. Upside potential 15.0%, maintain BUY.
