Investment points: Q2 Q2 single-quarter revenue and profit growth continues to improve, while asset quality continues to improve, we give "better than the market" rating.
Q2 revenue and profit growth increased significantly in a single quarter. Qilu Bank's revenue in the first half of 2023 increased by 10.88% compared with the same period last year, and its net profit growth rate increased by 15.49% over the same period last year. Q2's revenue in the first quarter increased by 12.88%, which was much higher than that of Q1's 8.72%, and Q2's net profit increased by 18.91% in the first quarter compared with Q1's 12.33%.
The county business is developing rapidly. In the first half of 23, the deposit balance of the county branch (excluding subsidiaries) of Qilu Bank was 109.183 billion yuan, an increase of 14.17% over the end of 2022, and the growth rate was 3.48% higher than that of the whole bank; the loan balance was 80.114 billion yuan, an increase of 16.82% over the end of 2022, and the growth rate was 6.14% higher than that of the whole bank; the number of county customers reached 1.8466 million, an increase of 7.39% over the end of 2022, and various development indicators of the county maintained rapid growth.
The overall quality of assets has improved. The defect rate of Qilu Bank decreased by 1bp to 1.27% compared with 23Q1, and the provision coverage increased significantly by 17.22 percentage points to 302.06% compared with 23Q1. In addition, 23Q2 Qilu Bank focused loans accounted for 1.60%, compared with Q1 decreased 4bp. The overall asset quality of Qilu Bank shows a trend of improvement.
Investment advice. We forecast that the EPS from 2023 to 2025 will be 0.9,1.03,1.14 yuan, and the growth rate of net profit will be 15.38%, 13.78% and 10.95%. According to the DDM model (see Table 2), we get the reasonable value of 4.81yuan; according to the PB-ROE model, we value the 2023E PB of the company at 0.8x (0.62x of the comparable company), and the corresponding reasonable value is 5.65yuan. Therefore, the target price is 4.81 yuan (corresponding to 5.34 times of PE in 2023 and 4.60 times of PE of peer companies), maintaining a "better than the market" rating.
Risk hints: the solvency of enterprises has declined, asset quality has deteriorated significantly, and major changes have taken place in financial regulatory policies.