Core views:
2021H1 achieved total revenue and net investment income of 2,458 billion yuan (RMB, same below), +111% year on year, and achieved net profit of 1,228 billion yuan to the mother, +202% over the same period last year.
Various business lines have fully blossomed: (1) The investment management division achieved total revenue and investment income of 1,321 million yuan, +105% over the previous year, accounting for 54% of the total, of which achieved net investment income of 1.12 billion yuan, +165% over the same period last year, benefiting from the increase in the value of investment companies in the fund portfolio. The company's investment management capabilities are outstanding. As of the end of June 2021, the IRR of completed investment funds averaged 54%. (2) The investment banking division achieved revenue of 742 million yuan, +168% year on year, of which stock underwriting revenue was 322 million yuan. According to the company's interim report, the current underwriting amount was 168.2 billion yuan. Hong Kong stock underwriting market share ranked 6th and ranked 3rd among Chinese financial institutions. (3) The wealth management business is growing rapidly. At the end of June, the management scale reached 7 billion yuan, double that of 3.4 billion yuan at the beginning of the year. The subsidiary Huaxing Securities turned a profit and achieved operating profit of 163 million yuan. It collaborated well with the Group's investment banking business.
Investment advice: (1) In the early fund exit period, in addition to investment income, there was still a total of 1.9 billion yuan of unrealized equity sharing, which is expected to continue to increase net profit. (2) New fund raising is progressing well. At the end of June, the fee-type management scale was only 21.5 billion yuan. The scale is expected to increase dramatically after fundraising is completed, generating continuous management fee revenue and subsequent continuous equity sharing and investment income. (3) In addition to its own capital, it received a loan of 300 million US dollars from a syndicated bank in May 2021. The company disclosed that it plans to increase the proportion of its own capital invested in Huaxing Fund to 8-10%, which is expected to further increase investment income and ROE.
Investment bank+investment collaboration has continuous growth. The company is expected to achieve net profit of 1,462 million yuan in 2021, an increase of 40.9% over the previous year. Maintaining the previous forecast of the company's reasonable value of HK$41.86 per share (HK$1 = RMB 0.83), the corresponding valuation of 2021E is approximately 12.7xPE.
Maintain an “increase in holdings” rating. The company itself is doing well. Gradually clarifying the regulation of overseas listings and new economy industries is beneficial to easing market uncertainty, which will help the company further release performance flexibility and improve valuations.
Risk warning: The tightening of listing channels hampers fund withdrawal and first-level market sentiment; large fluctuations in the capital market affect the value of fund portfolios; the progress of new fund raising falls short of expectations, etc.