Key points
We expect a stronger 2H21 thanks to stronger volume growth in on- balance-sheet business and platform business.
New initiatives for partnerships with SaaS providers are long-term growth drivers. Maintain Outperform.
A weak result in 1H21, but 2H21 outlook is positive
Stronger volume growth into 2H21. After building the platform business with more banks, we believe the balance of its platform business will grow faster, at 80% YoY in 2H21. As such, we expect net profit to grow at 30% YoY in 2H21 while asset quality remains healthy.
Initiatives in new businesses. We believe SYC’s strategic partnerships with SaaS providers will bring in more factoring businesses and diversify its portfolio. SYC announced that it plans to invest Rmb40 million in LinkedCare, an SaaS provider for dental clinics and aesthetics companies, on 23 June. It has also announced it will invest Rmb21 million in MC Tech, a leading SaaS provider of engineering management solutions for the infrastructure sector on 12 August.
Valuation
We set our price target at HK$11 based on PB target of 2.4x, compared to 2.1x previously on higher ROE forecasts, and 2022E book of Rmb3.92. The PB multiple of 2.4x is 1SD above its historical average.