Introduction to this report:

The Bank of Suzhou plans to establish a Xuzhou branch to achieve full business coverage in Jiangsu Province and further open up room for growth. Maintain the target price of 9.21 yuan, maintain an increase in holdings rating, and continue to focus on recommendations.

Key points of investment:

The investment proposal maintains the 2023-2025 net profit growth forecast of 21.1%, 20.4%, and 20.9%, and the corresponding BVPS is 10.76, 11.90, and 13.28 yuan/share. Considering the strong margin of safety brought about by regional advantages and adequate provisions, as well as opening up room for growth and upward flexibility in the new stage of development, the target price of 9.21 yuan was maintained, and the holding increase rating was maintained.

On December 12, the Bank of Suzhou announced that the board of directors resolved to establish a Xuzhou branch. Specific matters such as subsequent construction and opening of business are still subject to review and approval by the Jiangsu Supervisory Authority. After the Xuzhou branch is established, the company will achieve full business coverage in Jiangsu Province and further open up room for growth. After the Xuzhou branch opens and operates, it is expected to boost the company's financial performance in terms of volume (incremental market) and price (asset spread between northern Jiangsu and southern Jiangsu).

In recent years, the establishment of banking institutions in Suzhou has progressed steadily, and the exhibition area continues to expand. As of the 2023 mid-term report, the Bank of Suzhou had 12 branches and 173 branches in Jiangsu Province, and 2/2/3 new institutions were set up in 2021, 2022, and 2023H1 respectively, laying a good foundation for the subsequent acceleration of development.

Bank of Suzhou is an extremely scarce bottom-growth stock in the banking sector. On the basis of the complete elimination of the previous round of defects, under the leadership of the new management team, we have entered a new stage of accelerated development, and it is expected that the comparative advantage at the financial level will expand further in the future. At the same time, current valuations and positions are at a low level, and the investment is cost-effective and safe.

Risk warning: Demand repair falls short of expectations.