GF Securities: Soochow's merger and acquisition is progressing rapidly, and the securities industry landscape continues to optimize.

GF SEC released a research report stating that under the top-level design of building a strong financial country and creating a first-class investment bank, the integration of non-controlling securities firms conforms to policy guidance and will accelerate industry consolidation through regional coordination to optimize the industry landscape. The securities sector is currently at a historically low valuation, with short-term volatility amplified by external risks, but the stability of Chinese assets opens up space for allocation, and the trend of incremental funds entering the market still exists. Under the stable market mechanism, a slow bull trend can be expected, and the capital market reform opens up business growth opportunities, highlighting the value of sector allocation with potential for performance catalysis. GF SEC's main points are as follows: Soochow's acquisition of Eastern Securities is progressing rapidly On the evening of March 2, Soochow issued a suspension announcement regarding the planned acquisition; on the evening of March 13, Soochow issued a proposal to issue shares and pay cash to purchase assets and conduct related transactions, clearly intending to acquire 83.77% of the equity of Eastern Securities through a combination of issuing shares and paying cash, with an issuing price of 9.46 yuan per share, approximately 1.1xPB based on the average price of the stock in the previous 20 trading days before the pricing date. Eastern Wu and Eastern Securities stocks resumed trading on March 16, with the subsequent steps including the completion of the value audit and evaluation of Eastern Securities by the Changzhou Investment Group, another board meeting, approval by the shareholders' meeting, followed by regulatory approval or registration before implementation. Aligned with the policy direction of building a first-class investment bank, this acquisition will help optimize the layout of financial state-owned assets in Jiangsu Province, deepen the layout and business synergies in the Yangtze River Delta, and further enhance the scale effect and synergy of securities business. Changzhou Investment Group will become an important related party of Eastern Wu, benefiting the company in deepening strategic cooperation with local governments and industry platforms, expanding corporate client and government project resources. Soochow's enhanced capital strength and expanded customer base after integration, comprehensive competitiveness is expected to improve By integrating the comprehensive service capabilities of Eastern Securities in wealth management, investment banking, asset management, futures trading, etc., Soochow will address its weaknesses in regional cultivation and business synergy, enhance overall profitability and market competitiveness. Based on 25H1 data, a simple total sum calculation shows that after the merger, Soochow's total assets/net assets/revenue/net profit attributable to the parent company will increase by 5/4/2/0 ranks to reach the 17th/16th/18th/14th positions. By strengthening capital strength and optimizing self-earning and profit elasticity, the potential for profit growth is expected to be amplified. In addition, this transaction will drive Soochow to achieve a strategic upgrade from a regional securities firm to a national comprehensive financial group. As of March 13, Eastern Wu had 29 branch offices, 126 business departments, mainly distributed in Suzhou, Jiangsu and Zhejiang regions; Eastern Securities had 19 branch offices, 63 business departments, mainly concentrated in Changzhou, Jiangsu and Henan regions, which will help enhance the network coverage and service density in the province. The resources in the Yangtze River Delta are abundant and the economic vitality is prominent, and the integrated company is expected to further tap into the regional potential. Under the top-level design of building a strong financial country and creating a first-class investment bank, the integration of non-controlling securities firms conforms to policy guidance and will accelerate industry consolidation through regional coordination to optimize the industry landscape. The current securities sector is at a historically low valuation, with short-term volatility amplified by external risks, but the stability of Chinese assets opens up space for allocation, and the trend of incremental funds entering the market still exists. Under the stable market mechanism, a slow bull trend can be expected, and the capital market reform opens up business growth opportunities, highlighting the value of sector allocation with potential for performance catalysis. Risk warning There is uncertainty in the integration effect after the acquisition, risks of industry policy changes, intensified industry competition risks, and market excessive fluctuations, etc.