Phillip Securities Group
Please note that the Day Light Saving of Europe and US will be effective on April 1st and March 11th respectively. The trading hours for those relevant contracts will be 1 hour earlier. Any questions, please contact us at 22776677.For details, please visit our foreign futures website or contact us at 22776677.Moreover,the spread of USD/JPY is low as one pip.Please click here for details
Research Report: Stock code:
  27-02-2015 (五)    BoCom (3328.HK) - Stable profit growth
  26-02-2015 (四)    ZTE (763.HK) - 2014 Results Met the Expectation
  25-02-2015 (三)    SAIC Motor (600104.CH) - Earning met our expectation
  24-02-2015 (二)    SPT Energy (1251.HK) - Operation in 2015 will be challenged
  23-02-2015 (一)    Xinjiang GoldWind (2208.HK) - Speeds up or Slides in the Next Year
[第1頁 / 共494頁]
BoCom(3328)
27-02-15
  Share this article:    
Recommendation on   27-02-15 
Recommendation Buy
Price on Recommendation Date $ 6.710
Suggested purchase price N/A
Target Price $ 8.200
Weekly Special - 753 Air China
Written by: Xingyu Chen( Research Analyst )
Tel:
+86 21 5169 9400 – 105

Email:
chenxingyu@phillip.com.cn

BoCom (3328.HK) - Stable profit growth

Summary

-According to BoCom's 2014Q3 Results, by the end of Sep 2014, the Group's net profits reached to RMB51.522 billion, up 5.8% y-y approximately, in line with our expectation, equivalent to the EPS of RMB0.69. The profit growth rate slowed down compared with 9.4% in 3Q2013. Net interest income growth rate reduced to 4.49% due to the large increase of interest expenses, but increased slightly q-q. Meanwhile, due to the obvious growth of the NPLs, the Group's impairment losses increased largely by 23.7% y-y to RMB16.5 billion. On the other hand, BoCom's intermediate business incomes increased stably, and net commission fees grew 17.9% y-y to RMB22.984 billion during the period;

-We pay close attention to the bank's asset quality. BoCom's asset quality went down obviously in 3Q2014. It reduced the expansion of loans to SMMEs, and the portion of the loans to total loans cut 2.48ppts to 40.37% in 3Q2014 from 42.85% in 2013, with the amount of RMB1.26 trillion, up 0.03% slightly. The management stated that bad debts in excess capacity industries such as steel trading industry and SMMEs increased consistently under the downturn of the macroeconomic environment, especially in Zhejiang and Jiangshu Provinces, which caused the Group's NPL ratio increased obviously from 1.05% in 2013 to 1.17% in 3Q2014, with the sharp growth of doubtful and loss loans. The coverage ratio dropped from 213.65% to 201.29%, down 12.36ppts. We believe BoCom will still face the risk of deterioration of asset quality in future, both the amount and ratio of NPLs will increase continually, and the NPL ratio would go up to 1.22% in 2014, the trend meets our expectation;

-Overall, BoCom's businesses recorded the stable growth, the profit growth continued to decrease, but will rebound in future. We expect its net profit growth would maintain around 7% in 2014, higher than that of 2013. In addition, BoCom's dividend payout ratio still stays at the high level as 30%, based on 3-stage DDM, we increase the Group's 12-m target price to HK$8.20, around 22% higher than the current closing price, equivalent to 6.8xP/E and 0.9xP/B in 2015E respectively, the valuation is quite attractive, and maintains Buy rating.

Stable profit growth in 2014

By the end of Sep 2014, the Group's net profits reached to RMB51.522 billion, up 5.8% y-y approximately, in line with our expectation, equivalent to the EPS of RMB0.69. The profit growth rate slowed down compared with 9.4% in 3Q2013. Net interest income growth rate reduced to 4.49% due to the large increase of interest expenses, but increased slightly q-q. Meanwhile, the Group's impairment losses increased largely by 23.7% y-y to RMB16.5 billion due to the obvious growth of the NPLs.

However, due to the development of the market environment, BoCom's intermediate business incomes increased rapidly, and net commission fees grew 17.9% y-y to RMB22.984 billion. The fees of settlement and management increased by 38.98% and 43.58% y-y to RMB2.453 billion and 5.11 billion, and bank card fees also increased by 19.70% y-y to RMB7.916 billion. The fees of investment banking business dropped 22.71% y-y to RMB4.605 billion.

We expect BoCom's interest incomes and intermediate business incomes would maintain stable growth, but the operating expense will go up, especially for impairment losses, and the Group's net profit would increase by 7% approximately to RMB66.8 billion in 2014.

The asset quality went down continually

The assets of BoCom increased stably, and the Group's total assets raised around 4.22% to RMB6.21 trillion compared with the end of 2013, net asset increased by 8.6% to RMB455.80 billion, equivalent to the BVPS of RMB6.14.On the other hand, BoCom's asset quality went down obviously in 3Q2014. It reduced the expansion of loans to SMMEs, and the portion of the loans to total loans cut 2.48ppts to 40.37% in 3Q2014 from 42.85% in 2013, with the amount of RMB1.26 trillion, up 0.03% slightly. The management stated that bad debts in excess capacity industries such as steel trading industry and SMMEs increased consistently under the downturn of the macroeconomic environment, especially in Zhejiang and Jiangshu Provinces, which caused the Group's NPL ratio increased obviously from 1.05% in 2013 to 1.17% in 3Q2014, with the sharp growth of doubtful and loss loans, up 29.26% and 31.31% respectively compared with the end of 2013. The coverage ratio dropped from 213.65% to 201.29%, down 12.36ppts. We believe BoCom will still face the risk of deterioration of asset quality in future, both the amount and ratio of NPLs will increase continually, and the NPL ratio would go up to 1.22% in 2014, the trend meets our expectation

Risk

Lower-than-expected growth of incomes;

The deterioration of the asset quality due to the sharp growth of the NPLs;

Increase of the capital pressure;

Share price decreases largely affected by the market environment in the short run.

FINANCIALS

Click Here for PDF format...

Back to Top


Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources believed to be reliable. However, we do not verify such information. We do not guarantee its accuracy or completeness, nor do we take responsibility for any loss occasioned by reliance placed upon the contents hereof. Any statements nonfactual in nature constitute only current opinions, which are subject to change. Phillip Securities (HK) Ltd (or one of its affiliates) or their officers, directors, analysts, or employees may have positions in securities or commodities referred to herein, and may, as principal or agent, buy and sell such securities or commodities. An employee, analyst, officer, or a director of Phillip Securities (HK) Ltd, or its affiliates, may serve as a director for companies mentioned in this report. Neither the information nor opinion expressed in this report shall constitute a solicitation to buy or sell any securities. There may be instances when fundamental, technical, and quantitative opinions may not be in concert. This firm (or one of its affiliates) may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any company mentioned in this report.
There are risks inherent in international investments, which may make such investments unsuitable for certain clients. These include, for example, economic, political, currency exchange rate fluctuations, and limited availability of information on international securities. We recommend that you obtain the advice of your Financial Advisor regarding this or other investment in order to conform to your financial resources and risk preference

Copyright © 2011 Phillip Securities Group. All Rights Reserved [ Risk Disclosures Statement ] [ Terms and Conditions ] [ Personal Data Policy ]