QILU BANK(SH:601665) GF SECURITIES·2024-07-18 03:31Investment Rating - The report assigns a "Buy" rating to the company with a current price of 4.59 CNY and a reasonable value of 5.92 CNY [2]. Core Views - Qilu Bank is deeply rooted in a major economic province, with continuously improving asset quality and a solid provision cushion. Its performance over the past year has significantly outperformed the overall level of listed city commercial banks. With the backdrop of economic provinces taking the lead and favorable policies for the transformation of old and new kinetic energy in Shandong Province, it is expected that credit demand will remain high, leading to accelerated expansion and significant potential for performance release, warranting active investor attention [2][34]. Summary by Sections Company Overview - Qilu Bank is the first city commercial bank in Shandong, with a balanced and diversified shareholding structure and a strong management team focused on the banking system [5]. Regional Advantages - Shandong Province has a large economic scale and relatively low credit debt dependency, with credit growth exceeding the national level. Jinan, as the provincial capital, enjoys multiple policy benefits, particularly from the 15-year strategic planning for the transformation of old and new kinetic energy, which is expected to create sustained credit demand across various sectors [2][34]. Business Highlights - Since 2017, Qilu Bank has strategically focused on county-level finance, enhancing its service quality and contribution from county financial operations. The bank has established financial centers in county branches to improve financial services and has actively supported small and micro enterprises through innovative financing models [2][34]. Performance Analysis - The bank's return on equity (ROE) is superior to that of other city commercial banks in the region, attributed to effective cost control, higher net income from fees and commissions, and a lower cost-to-income ratio. The bank's credit cost is higher than the industry average, but asset quality has improved significantly, indicating potential for future ROE and valuation enhancement [2][34]. Profit Forecast and Investment Recommendation - The forecast for net profit growth for 2024 and 2025 is 10.4% and 11.6%, respectively, with earnings per share (EPS) projected at 0.94 CNY and 1.05 CNY. The current stock price corresponds to a price-to-earnings (PE) ratio of 5.36X and 4.77X for 2024 and 2025, respectively. Given the improving fundamentals and significant performance release potential, a price-to-book (PB) valuation of approximately 0.75X is suggested for 2024, leading to a reasonable value of 5.92 CNY per share [2][34].