The Zhitong Finance App learned that BOC International released a research report stating that it downgraded the card (09923) rating to “neutral” and lowered the 2024 revenue/net profit forecast due to increased store competition and short-term pressure on payment rates. Based on a price-earnings ratio of 15 times in 2024, the target price was reduced from HK$21 to HK$16. The company's upward risk is that the industry is clearing out at an accelerated pace, and payment GPV growth/rate improvement is faster than expected. Downside risk: Payment channel expansion falls short of expectations.

The main views of JBC International are as follows:

Revenue and profit forecasts for the full year of 2023 were lowered, and the rapid growth trend of EBITDA remained unchanged after adjustment.

The bank lowered its total revenue forecast for 2023 by 11% to 3.9 billion yuan (RMB), a year-on-year increase of 14%, mainly due to: 1) the impact of one-time adjustments to the payment business and short-term pressure on rates; 2) the impact of competition on in-store business growth. Based on the revenue reduction, the bank adjusted its net profit forecast to 80 million yuan, corresponding to a net interest rate of 2%, compared with the previous forecast of 150 million yuan/ 4%. Excluding the one-time impact, the bank expects adjusted EBITDA to increase 160% year over year to 550 million yuan, maintaining the expansion trend, benefiting from the expansion of the payment business and narrowing of in-store losses.

GPV payments have not increased, and rates are under pressure in the short term.

The bank expects payment volume (GPV) of 2.8 trillion yuan in 2023, an increase of 26% over the previous year. It is basically in line with previous expectations, mainly benefiting from the recovery of offline consumption and the expansion of agent channels. However, considering: 1) Document 259 is fully implemented, and 2) the payment business is adjusted in one go. The bank expects the short-term rate to be lowered or higher than the bank's previous expectations. The payment rate for 2023 is expected to be 0.122% (compared to 0.129% compared to 1H23), corresponding payment revenue of 3.4 billion yuan, an increase of 24% over the previous year. In the long run, the development of industry compliance or speeding up the clearance of small and medium-sized institutions will help increase industry concentration and benefit leading institutions.

In the short term, the store focused on turning losses into profits, and lowered GMV/revenue expectations for the whole year.

The bank expects GMV arriving at stores in the second half of 2023 to be 1.9 billion yuan, a year-on-year flat/year-on-month decrease of 20%. The corresponding GMV for the whole year is 4.4 billion yuan, lower than the forecast of > 5 billion yuan in early 2023, mainly due to further intensification of competition among Douyin service providers. The bank expects in-store revenue of 100 million yuan for the full year of 2023, a year-on-year decrease of 69%, and a corresponding commission rate drop of 7.6 percentage points to 2.5%, mainly due to: 1) the lower commission rate for the direct management model due to increased competition; 2) the partner model's lower commission rate. The bank expects a loss of 39 million yuan at the store, which is a further narrowing compared to 200 million yuan last year. In the current competitive environment, the company may focus on turning losses into profits in the short term, and GMV and revenue may slow down.