Key investment points: Qilu Bank insists on supporting the local economy, steadily improving profitability, growing rapidly in non-interest income, maintaining stable asset quality, and maintaining a “superior to the market” rating.
Profitability increased steadily. Qilu Bank's 23Q4 revenue was +7.4% YoY, Net Profit to Mother +22.3% YoY; 24Q1 Revenue +5.5% YoY, and Net Profit to Mother +16.0% YoY. The profit growth rate in 23Q4 was faster than in Q3, and the 24Q1 profit growth rate exceeded the same period in 23 years. The ROE for '23 and 24Q1 was 12.90% and 12.25%, respectively, +0.98pct and +0.13pct year-on-year, respectively.
Non-interest income is growing rapidly. The year-on-year growth rates of non-interest revenue in '23 and 24Q1 were 23.5% and 22.3%, respectively, thanks to which the company successively obtained escrow fund qualifications and bond underwriting qualifications. At the same time, the company set up a transaction banking department to strengthen product portfolio applications and enhance customer stickiness; actively carry out light capital businesses such as underwriting, consignment, distribution, and matching, and the wealth management product shelf continues to be rich.
Asset quality remains stable. In '23, the non-performing rate remained flat at 1.26% month-on-month, and the attention rate was -7bp to 1.38% month-on-month.
The 24Q1 defect rate was -1bp to 1.25% month-on-month, and the attention rate was -6bp to 1.32% month-on-month. Overdue loans in '23 fell 6bps to 1.0% compared to mid-year. The provision coverage rate remained above 300%.
Support the local economy. The company firmly follows the path of integrated urban and rural development, carried out the “one county, one product” project, solidly promoted rural revitalization, and increased county loans by 26%; strengthened online and offline linkages in inclusive business, and accelerated the integration of inclusive financial services with industrial scenarios, accounting for more than 21% of inclusive loans.
Investment advice. We forecast EPS of 1.03, 1.23, and 1.47 yuan in 2024-2026, with net profit growth rates of 17.69%, 19.80%, and 19.24%. We obtained a reasonable value of 6.21 yuan according to the DDM model; according to the comparable valuation method, the 2024E PB valuation was 0.80 times (0.60 times the comparable company), and the corresponding reasonable value was 6.17 yuan. Therefore, the reasonable value range is 6.17-6.21 yuan (corresponding to 2024 PE is 5.99-6.02 times, corresponding PE is 4.89 times that of the same company), maintaining the “superior to the market” rating.
Risk warning: The solvency of enterprises has declined, asset quality has deteriorated dramatically; financial supervision policies have undergone major changes.