Introduction to this report:
Bank of Suzhou not only has a strong margin of safety based on regional advantages and sufficient provisions, but also has room for growth and upward flexibility opened up in a new stage of development. It focuses on recommendations, maintains a target price of 9.21 yuan, and maintains an increase in holdings rating.
Key points of investment:
Expansion has accelerated, growth can be expected, and a new stage of development has been entered. In 2023, the new chairman and governor of the Bank of Suzhou took office one after another, formulated new development plans, marginally strengthened the customer base management of medium-sized enterprises; innovated the organizational structure, changed the division system to an optimized general branch system, and opened up room for growth.
The comparative advantage in performance is expected to be further highlighted. Bank of Suzhou's comparative advantage at the financial level has gradually expanded since 2021. Scale expansion is expected to remain relatively rapid in the future, while interest spreads that seriously dragged down revenue in the early period. Subsequent use of loan structure optimization and time deposit interest rate cuts to release dividends, the trend is expected to be better than that of peers, jointly driving relatively strong revenue performance. At the same time, Bank of Suzhou will have both room for profit release in the future (revenue is expected to be stronger than that of peers, stable asset quality) and willingness (future growth requires a certain amount of endogenous capital supplement).
Undervaluation, low position, high investment cost performance, and good security. The economic development momentum of the Suzhou region is strong. The Bank of Suzhou operates steadily and has strict risk control, excellent asset quality, and undervaluation brings a strong margin of safety. Furthermore, at the end of 2023Q3, active public funds held only 0.01% of positions in Bank of Suzhou, and the micro-transaction structure is relatively healthy.
Investment suggestions: Maintain the 2023-2025 net profit growth forecasts of 21.1%, 20.4%, and 20.9%, corresponding to BVPS of 10.76, 11.90, and 13.28 yuan/share. Considering the strong safety margin brought by regional advantages and sufficient provisions, and the new stage of development opens up room for growth and upward flexibility, maintain the target price of 9.21 yuan and maintain the increase rating.
Risk warning: Credit demand falls short of expectations, falling interest spreads exceeding expectations, etc.