AGRICULTURAL BANK OF CHINA(601288)2024-10-14 14:30Investment Rating - The investment rating for Agricultural Bank of China Limited is Overweight [1][3]. Core Views - The report highlights a play on the government's economic rebalancing, with continuously improving asset quality and the highest NPL coverage ratio among the Big 5 banks [5]. - The bank has a strong deposit franchise, particularly in rural areas, leading to a stable funding structure, with deposits accounting for 78% of total liabilities in FY2023 [5]. - The valuation is attractive, with a projected 2024E dividend yield of 7.7%, compared to 5.3% for ABC-A [5]. Earnings Forecasts - Earnings forecasts for Agricultural Bank of China Limited have been revised following 2Q24 results, with net interest margin (NIM) forecasts adjusted to 1.43%/1.39%/1.42% for 2024/25/26 [1]. - Loan growth estimates have been raised to 9.2%/7.7%/6.3% for the same periods, leading to higher net interest income growth forecasts of 2.3%/5.1%/9.6% in 2024/25/26 [1]. - Net profit forecasts have been slightly revised up to 2.2%/2.7%/2.5% for 2024/25/26, with EPS estimates increased by 1.1%/1.1%/0.7% for the same years [1]. Price Target and Valuation - The price target for Agricultural Bank of China Limited is set at HK6.59 and a bear case of HK$1.55 [3][4]. - The report employs a three-stage dividend discount model with a probability-weighted approach, assigning 60% to the base case, 20% to the bull case, and 20% to the bear case [6]. Risk Reward Themes - The risk-reward chart indicates a 94% Overweight rating, with 0% Equal-weight and 6% Underweight [6]. - Key themes include pricing power being negative, with various scenarios outlined for bull, base, and bear cases reflecting different economic conditions [6][7].