Industrial Bank: Initiating Coverage With CNY 18.10 Fair Value Estimate and No-Moat Rating

We initiate coverage on Industrial Bank, or CIB, with a fair value estimate of CNY 18.10 per share, implying a 0.48 times 2024 price/book ratio. This is lower than the 0.56 times average implied valuation of Chinese joint-stock banks we cover, which we think is due to the lower earnings growth projections for CIB in our forecast period versus its peers. The stock is fairly valued, trading at 2% below our fair value estimate and a 5.8% dividend yield, slightly higher than the 5.5% average yield of Chinese banks we cover. Though we expect CIB’s revenue growth will lead joint-stock bank peers in 2024 thanks to resilient loan pricing and normalized fee income, net profit growth is still under pressure given growing credit risks in its higher-than-peer property loan exposure.