20130829-DBS_Group-Agricultural_Bank_of_China_Leading_earnings_from_laggard_13页_257kb
报告摘要
Agricultural Bank of China (ABC) Summary
Core Content
This report provides an analysis of Agricultural Bank of China (ABC), one of the Big 4 state-owned commercial banks in China. The report highlights the bank's financial performance, capital adequacy, and valuation, with a focus on its 2Q13 and 1H13 results. It also compares ABC with its peers and reiterates a BUY recommendation based on improved financials and a favorable outlook.
Key Highlights
- Price Target: HK$4.63 (12-month), up from the previous target of HK$4.59.
- EPS Forecast: The report's FY13-15 EPS forecasts are slightly higher than the consensus.
- Earnings Performance: ABC reported a 22% increase in 2Q13 net profit, beating estimates by 12% and the Bloomberg survey by 8%.
- Non-Interest Income Growth: Non-interest income grew by 22.4% year-over-year, driven by fee growth of 29.1%.
- Cost Efficiency: Operating expenses growth was 9% in 1H13, showing better efficiency than previous periods.
- Capital Adequacy: ABC's core T1 CAR was 9.11% as of June 2013, slightly below the Big 4 peers but above the current regulatory requirements. The report suggests that the capital position is not a major concern due to one-off deductions.
- Dividend Yield: Expected to increase from 5.8% in 2012 to 8.3% in 2015, indicating improved shareholder returns.
- P/BV Valuation: ABC is valued at 1.36x FY13F P/BV, which offers 40% upside from the current price of HK$3.29.
- ROE: The report forecasts a 21.1% ROE for FY13, decreasing slightly to 18.8% in FY15, but still above the average of its peers.
Key Viewpoints
- Earnings Sustainability: Unlike other banks, the report expresses confidence in ABC's earnings sustainability due to better NPL trends and lower exposure to coastal areas.
- Non-Consensus Pick: ABC is considered a non-consensus top pick despite being a laggard due to its stake disposal and relative capital weakness.
- Equity Raising Risk: The report does not foresee equity raising risk, even with structural ROE declines and a stable 35% dividend payout.
- Macro Improvements: Improvement in macro indicators is identified as a potential catalyst for future performance.
Key Financial Data
Earnings and Profitability
| FY Dec (RMB m) | 2012A | 2013F | 2014F | 2015F |
|---|---|---|---|---|
| Pre-prov. Profit | 242,162 | 268,695 | 290,456 | 313,172 |
| Pretax Profit | 187,927 | 219,648 | 236,284 | 255,172 |
| Net Profit | 145,094 | 170,614 | 183,908 | 198,746 |
| EPS (RMB) | 0.45 | 0.53 | 0.57 | 0.61 |
| EPS (HK$) | 0.55 | 0.67 | 0.72 | 0.78 |
| EPS Growth (%) | 19 | 18 | 8 | 8 |
| PE (X) | 6.0 | 4.9 | 4.6 | 4.2 |
| P/Book Value (x) | 1.2 | 1.0 | 0.8 | 0.7 |
Capital Adequacy
| FY Dec | 2012 | June 2013 | 2013F | 2014F | 2015F | 2016F | 2017F | 2018F |
|---|---|---|---|---|---|---|---|---|
| Core T1 CAR (%) | 9.68 | 9.11 | 9.52 | 9.73 | 9.96 | 9.88 | 9.85 | 9.78 |
| RWA (RMB bn) | 7,216 | 8,613 | 9,106 | 10,187 | 11,298 | 12,484 | 13,733 | 15,106 |
| Total Equity (RMB bn) | 750 | 790 | 868 | 992 | 1,120 | 1,234 | 1,353 | 1,477 |
| ROE (%) | 20.7 | 21.1 | 19.8 | 18.8 | 15.6 | 14.9 | 14.1 | 13.4 |
Dividend Discount Model
| FY Dec | 2013F | 2014F | 2015F | 2016F | 2017F | 2018F |
|---|---|---|---|---|---|---|
| Book Value per Share (HK$) | 3.4 | 3.9 | 4.4 | 4.9 | 5.5 | 6.1 |
| ROE (%) | 21.1 | 19.8 | 18.8 | 15.6 | 14.9 | 14.1 |
| EPS (HK$) | 0.67 | 0.72 | 0.78 | 0.77 | 0.82 | 0.86 |
| DPS (HK$) | 0.21 | 0.23 | 0.25 | 0.24 | 0.26 | 0.27 |
| Present Value (HK$) | 0.21 | 0.20 | 0.19 | 0.17 | 0.16 | 0.14 |
| Terminal Value (HK$) | 5.91 | |||||
| Total Value (HK$) | 4.63 |
Peer Comparison
| Bank | Ticker | Price (HK$) | Rating | Target Price (HK$) | Upside (%) | PE (X) | EPS CAGR (%) | PBV (X) | Dividend Yield (%) |
|---|---|---|---|---|---|---|---|---|---|
| ICBC - H | 1398 HK | 5.05 | Buy | 6.57 | 30 | 5.7 | 5.3 | 6.9 | 6.1 |
| CCB - H | 0939 HK | 5.62 | Buy | 7.81 | 39 | 5.1 | 4.9 | 8.6 | 7.1 |
| BOC - H | 3988 HK | 3.23 | Buy | 4.28 | 33 | 5.1 | 4.8 | 5.3 | 6.9 |
| ABC - H | 1288 HK | 3.29 | Buy | 4.63 | 41 | 4.9 | 4.6 | 12.6 | 7.1 |
| BoCom - H | 3328 HK | 5.12 | Buy | 6.75 | 32 | 4.7 | 4.6 | (0.6) | 6.3 |
| CMB - H | 3968 HK | 13.80 | Buy | 19.00 | 38 | 5.2 | 5.0 | 2.2 | 6.1 |
| CNCB - H | 0998 HK | 3.67 | Buy | 4.96 | 35 | 3.8 | 3.8 | 7.4 | 5.3 |
| CMBC - H | 1988 HK | 8.12 | Buy | 10.20 | 26 | 4.3 | 3.8 | 12.2 | 7.1 |
| CQRCB - H | 3618 HK | 3.42 | Buy | 4.27 | 25 | 4.2 | 4.1 | 6.5 | 7.3 |
Summary of Key Metrics
- Earnings Momentum: Strong earnings growth in 2Q13 and 1H13.
- Credit Cost: Improved credit cost trends, with a 67bps in 1H13.
- Capital Adequacy: Slight capital weakness, but not a major concern.
- Dividend Yield: Expected to increase from 5.8% to 8.3%.
- P/BV Valuation: Valued at 1.36x FY13F P/BV, with 40% upside.
Analyst Information
- Analyst: Alexander LEE CFA, Nicole WU
- Contact: +852 2971 1930, +852 2820 4919
- Email: alexander_lee@hk.dbsvickers.com, nicole_wu@hk.dbsvickers.com
Key Assumptions
- NIM: Expected to decrease gradually from 2.85% to 2.58%.
- Loan Growth: Projected to grow at 12.9% in FY13, 10.9% in FY14, and 10.3% in FY15.
- Fee Income Growth: Projected to grow at 22.0% in FY13, 17.0% in FY14, and 14.0% in FY15.
- Cost-to-Income Ratio: Expected to remain around 42.9% to 43.7%.
- ROE: Projected to decline from 21.1% in FY13 to 18.8% in FY15.
- Credit Cost: Expected to decrease from 65.8bps in FY13 to 64.2bps in FY15.
- Dividend Payout Ratio: Maintained at 35.0%.
Conclusion
The report concludes that despite being a laggard, Agricultural Bank of China is a non-consensus top pick due to its strong earnings performance, improved credit cost trends, and sustainable profitability. The BUY recommendation is reiterated with a price target of HK$4.63 and 40% upside. The report also highlights that capital adequacy is not a major concern and that the bank's dividend yield is expected to increase, making it an attractive investment.
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