Event

When the company released its results for the first half of 2021, total income and net investment income increased by 110.6% compared with the same period last year, operating profit increased by 200.3% year-on-year, and the average annualized ROE increased by 38.4% in the first half of the year. Total income and net investment income increased by 110.6% to 2.458 billion yuan, of which operating income increased by 94.2% to 1.048 billion yuan, and net investment income increased by 124.7% to 1.41 billion yuan. The increase in operating income was mainly contributed by the income from transactions and consultancy fees, which increased by 185.3% to 795 million yuan compared with the same period last year. Operating profit increased by 200.3% to 1.405 billion yuan over the same period last year. The annualized average ROE38.4%, increased by 23.1% compared with the same period last year.

Brief comment

The contribution of investment bank income has increased, and the underwriting business has risen steadily. The total income and net investment income of the investment banking segment in the first half of 2021 increased by 168% to 742 million yuan compared with the same period last year, accounting for 30.2% of the total income and net investment income ratio from 23.7% in the Q2 quarter of 2020.

Operating profit increased by 627.5% to 284 million yuan over the same period last year.

The increase in the performance of the investment banking segment is mainly due to: 1) the increase in initial public offerings of the new economy has led to an increase in stock underwriting services, and investment bank stock underwriting income increased by 1411.9% to 322 million yuan in the first half of 2021 compared with the same period last year. In the first half of the year, 5 Hong Kong stock IPO projects and 9 US stock IPO projects were completed, of which China Renaissance Capital Investment, the Kuaishou Hong Kong IPO project, served as a co-sponsor, accounting for 24% of the underwriting share. 2) FA business is an important cornerstone of investment banking business. Consulting fees for private equity financing have increased, and investment banking advisory service income has increased by 53% to 294 million yuan compared with the same period last year. 3) sales, transaction and brokerage fees increased by 108.2% to 115 million yuan compared with the same period last year. 4) interest income and net investment income from structured finance-related products increased by 36.1% to 11 million yuan compared with the same period last year.

FA business is an important flow portal for China Renaissance Capital Investment. While creating stable income, with the further deepening of synergy among investment banking business sectors, FA business is expected to bring more investment opportunities and customer resources to the group's other first-tier business and asset management business. The group investment banking plus investment business model will continue to bring advantages for China Renaissance Capital Investment investment banking business and overall business growth.

The performance of the investment management division is outstanding, with the growth of net investment income as the main contribution. In the first half of 2021, the total income and net investment income of the investment management division increased by 105.3% to 1.32 billion yuan compared with the same period last year, accounting for 53.7% of the total income and net investment income ratio, which decreased by 1.4% compared with the Q2 quarter of 2020, but was still the company's largest source of income contributor. operating profit increased by 152.2% to 995 million yuan, and operating profit margin increased by 14% to 75.3%. As of June 2021, the company's total AUM exceeded 61 billion yuan, of which the new economy fund AUM accounted for 54%. The average investment return coefficient of the completed investment fund was 4.3 x, and the average IRR of the completed investment fund was 54%.

The performance of the Investment Management Division is mainly due to: 1) due to the slowdown in the inflow of new subscribed capital in the first half of 2021, management fees were reduced by 2.3% to 195 million yuan compared with the same period last year. The contributed capital and asset management of the company's private equity funds were 28.1 billion yuan and 61.7 billion yuan respectively as of the Q2 quarter of 2021, an increase of 1.9% and 7.5% respectively compared with the end of 2020. 2) the net investment income brought by the value increase of portfolio companies in independent management of private equity funds and third-party private equity funds increased by 165.3% to 1.122 billion yuan compared with the same period last year. 3) the carried interest income has been reduced by 80.3% to 4 million yuan compared with the same period last year. Investment management business is China Renaissance Capital Investment's realization export. Looking to the future, as part of the syndicated loan is invested in China Renaissance Capital Investment's own fund in the first half of the year, the company's asset management business capacity and asset management scale are expected to be further enhanced, enhancing customer service capacity and thickening the company's ROE level at the same time.

Huaxing Securities Division turned losses into profits in the first half of the year, and the internal synergy effect appeared. In the first half of 2021, the total income and net investment income of Huaxing Securities increased by 81.4% to 352 million yuan compared with the same period last year, accounting for 14.3% of total income and net investment income, a decrease of 2.3% compared with the Q2 quarter of 2020, and operating profit increased by 261.7% to 162 million yuan. The increase in the performance of Huaxing Securities Division is mainly due to 1) the appreciation of the investment value of Science and Technology Innovation Board's two listed shares on the Shanghai Stock Exchange, and the net investment income of Huaxing Securities Division increased by 55.9% to 273 million yuan compared with the same period last year. 2) the income from trading and consulting fees of Huaxing Securities Division increased by 536.9% to 64 million yuan compared with the same period last year. Looking ahead, with Huaxing Securities' further investment in boutique investment banking, further communication with China Renaissance Capital Investment in terms of resources and customers, and more projects or withdrawal in A shares and Hong Kong stocks in the future, the performance of Huaxing Securities Division is expected to further improve.

The wealth management business is developing steadily. China Renaissance Capital Investment's wealth management business provides value-added wealth management services to high net worth individuals and other high net worth groups represented by new economy entrepreneurs. Wealth management products take alternative assets and new economic assets as the core, covering cash management, fixed income, equity investment, alternative investment and so on. As of June 2021, the accumulated AUM of Huaxing Capital Wealth Management has reached 7 billion yuan. According to financial data, the income and net investment income of other segment businesses (mainly wealth management business and self-owned capital investment and management) decreased by 18.3% to 43 million yuan in the first half of 2021 compared with the same period last year, accounting for 1.8% of the total income and net investment income ratio. The decrease is mainly due to a decrease in investment income from cash management products. Looking to the future, with China Renaissance Capital Investment's further focus in the field of big asset management and great wealth, and the further deepening of the integration effect of wealth management business with investment banking and investment business, wealth management is expected to become a new realization export of the company.

Profit forecast and valuation: the return net profit of the company from 2021 to 2023 is 1,2572max 1879 million yuan respectively, and according to the market capitalization on August 24, 2021, the PE for the next three years is respectively 8.4x/6.7x/5.6x. Give a "buy" rating.

Risk hints: 1) policy risk; 2) Fund performance is not as expected.