CHANGSHU RURAL COMMERCIAL BANK(601128)：PROSPERITY CONTINUES AS BALANCE SHEET EXPANSION AND ASSET QUALITY IMPROVE

　　Changshu Rural Commercial Bank sustained its high prosperity in 1H23. The Company's balance sheet expansion momentum remained robust, and with revenue and profit growth trending steadily upward, its ability to resist risks has been continuously enhanced, leading us to expect that earnings growth should be sustainable. With the current valuation remaining at the lower end of a reasonable range, we advise investors to turn active in accumulating the stock.
　　 Earnings overview:
　　Changshu Rural Commercial Bank released preliminary 1H23 results, reporting unaudited operating revenue/attributable net profit （ANP） of Rmb4,914mn/1,450mn （+12.35%/+20.73% YoY）， respectively. The nonperforming loan （NPL） ratio decreased by 0.06ppts to 0.75% compared to the end of 2022.
　　 Steady and positive top-/bottom-line growth sustained high prosperity in earnings.
　　In 1H23, Changshu Rural Commercial Bank's operating revenue grew by 12.35% YoY （compared to 13.28% YoY in 1Q23）， while its ANP increased by 20.73% YoY （compared to 20.60% YoY in 1Q23）。 Despite facing multiple operational pressures in 2Q23, the bank's revenue growth momentum remained unchanged, along with still robust growth in profit. This was primarily attributed to 1） effective control over the net interest margin （NIM） and 2） further growth in fee-based income due to proactive planning in wealth management and insurance agency sales. The positive profit trend also contributed to improved returns, with the bank's annualized weighted return on equity （ROE） for 1H23 at 12.40%, an increase of 0.68ppts YoY.
　　 Robust momentum in balance sheet expansion and active growth in deposits and loans:
　　By the end of 1H23, Changshu Rural Commercial Bank's total assets amounted to Rmb317,814mn, expanding by 10.40% from the beginning of the year （compared to growth of 11.48% in 1H22 and 10.10% in 1Q23）。 The Company witnessed active growth in deposits and loans. Following the acquisition of Zhuhai Xiangzhou Village Bank （"珠海香洲村镇银行"）， the bank further expanded its deposit/loan customer base, laying a solid foundation for future growth. Total deposits and loans by end-1H23 reached Rmb242,209mn and Rmb214,670mn, respectively, up by 13.48% and 10.98% from the beginning of the year, as compared to 13.51% and 13.80% in 1H22.
　　 Asset quality remains outstanding, further enhancing the ability to offset risks.
　　By the end of 1H23, the bank's NPL ratio stood at 0.75%, consistent with the ratio at the end of 1Q23 and down 0.06ppts from the end of 2022, with excellent performance maintained despite the industry's multidimensional risk　　exposures in 2Q23. The provision coverage ratio reached 550.45%, an increase of 3.15ppts from 1Q23 and a significant rise of 13.68ppts from the end of 2022, further solidifying the bank's risk mitigation capabilities.
　　 Potential risks:
　　A sharp decline in macroeconomic growth rate, and bank asset quality deteriorating beyond expectations; sharp fluctuations in regional economic prosperity; underperformance in executing the bank's strategic plans; adverse changes in regulatory and industry policies.
　　 Investment recommendation: Prosperity continues as balance sheet expansion and asset quality improve.
　　Changshu Rural Commercial Bank sustained its high prosperity in 1H23. The Company's balance sheet expansion momentum remained robust, and with revenue and profit growth trending steadily upward, its ability to resist risks has been continuously enhanced, leading us to expect that earnings growth should be sustainable. With the current valuation remaining at the lower end of a reasonable range, we advise investors to turn active in accumulating the stock. We maintain our 2023E/24E/25E EPS forecast of Rmb1.20/1.39/1.60. With the stock trading at 0.77x 2023E PB, we adopt the three-stage dividend discount model （DDM） to keep our target price unchanged at Rmb9.1 on 0.99x 2023E PB and reiterate the "OVERWEIGHT" rating.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。