20230317-招银国际-远东宏信-03360.HK-NIM_expansion_HoH_in_2H22__sound_asset_quality_4页_853kb

Far East Horizon (3360 HK) Summary

Core Content

Far East Horizon (FEH) has demonstrated strong financial performance in FY22, with double-digit profit growth and continued NIM expansion despite macroeconomic challenges. The company is currently rated as BUY, with a target price of HK$12.50, indicating a potential upside of 86.6% from the current price of HK$6.70.

Key Financial Highlights

• Revenue Growth:

  • FY22A: RMB 36,586 million (+8.7% YoY)
  • FY23E: RMB 42,689 million (+16.7% YoY)
  • FY24E: RMB 49,377 million (+15.7% YoY)
  • FY25E: RMB 57,032 million (+15.5% YoY)

• Operating Profit:

  • FY22A: RMB 11,958 million (+6.5% YoY)
  • FY23E: RMB 13,415 million (+12.2% YoY)
  • FY24E: RMB 15,490 million (+15.5% YoY)
  • FY25E: RMB 17,866 million (+15.3% YoY)

• Net Profit:

  • FY22A: RMB 6,709 million (+7.7% YoY)
  • FY23E: RMB 7,375 million (+9.9% YoY)
  • FY24E: RMB 8,601 million (+16.6% YoY)
  • FY25E: RMB 10,009 million (+16.4% YoY)

• Earnings Per Share (EPS):

  • FY22A: RMB 1.46
  • FY23E: RMB 1.59
  • FY24E: RMB 1.87
  • FY25E: RMB 2.19

• Valuation Metrics:

  • P/E (FY23E): 3.1x
  • P/B (FY23E): 0.5x
  • Dividend Yield (FY23E): 8.1%
  • ROE (FY23E): 14.5%

• Net gearing remains stable at around 82% over the past few years.

Main Points

• NIM Expansion:

  • NIM increased by 53bps YoY in FY22 to 4.67%.
  • NIM rose by 37bps HoH in 2H22 to 4.86%, driven by lower funding costs and higher asset yields.

• Asset Quality:

  • NPL ratio and 30+ days overdue ratio showed sequential improvements in 2H22.
  • Provision coverage ratio improved to 240%.
  • The company has maintained a prudent risk management approach, with a minimal asset liability duration gap of 10+ days.

• Industrial Operations:

  • Revenue contribution from industrial operations increased to 36% in FY22 and 37% in 2H22.
  • The management is targeting an IPO for Horizon Construction Development (HCD) in 2023, which could unlock hidden value.

• Growth Outlook:

  • The company expects a resumption of interest-earning asset growth post-pandemic.
  • NIM is anticipated to remain high due to the increasing share of innovative business segments.

Key Information

• Dividend Yield is expected to rise to 11.1% in FY25E.

• ROE is projected to increase to 16.1% in FY25E.

• P/B is expected to decline to 0.4x in FY25E, reflecting potential undervaluation.

• The company is actively expanding its financial business through pricing strategies and innovative segments like inclusive finance and factoring.

• Shareholding Structure:

  • Sinochem Group: 21.3%
  • Kong Fanxing: 21.9%

• Stock Performance:

  • 1-month: -4.3%
  • 3-months: +10.9%
  • 6-months: +15.3%

Analyst Recommendations

• Rating: BUY (Maintain)
• Target Price: HK$12.50
• Reasoning:
  • Strong NIM expansion and stable asset quality.
  • Expected growth in interest-earning assets post-pandemic.
  • Improving margins and sound asset quality support share price performance.

Risk Disclaimer

• The report is not tailored to individual investors.
• Past performance is not indicative of future results.
• The value of investments may fluctuate and is not guaranteed.
• CMBIGM does not provide investment advice and recommends consulting a professional financial advisor.

CMBIGM Ratings

• BUY: Potential return of over 15% over the next 12 months.
• HOLD: Potential return of +15% to -10%.
• SELL: Potential loss of over 10%.
• NOT RATED: Not rated by CMBIGM.

Additional Notes

• The report is prepared for the use of intended recipients only.
• CMBIGM may have conflicts of interest and does not assume responsibility for the report's content.
• The information is based on analyses and may be subject to change without notice.