Shen Wanhongyuan disclosed that the performance growth rate was in line with expectations in the third quarter of 2021, with operating income of 24.891 billion yuan, an increase of 15.88% over the same period last year, and net profit belonging to shareholders of the parent company was 7.409 billion yuan, an increase of 13.48% over the same period last year. The company's weighted return on equity in the first three quarters was 8.05%, up 0.42 percentage points from a year earlier. The growth rate of the company's performance is basically in line with expectations.
The company allocated additional transactional financial assets in the third quarter.
At the end of September 2021, the company's total assets were 570.372 billion yuan, an increase of 49.774 billion yuan compared with the end of half a year, and an increase of 9.56% quarter-on-quarter. Of this total, transactional financial assets totaled 246.638 billion yuan, an increase of 35.473 billion yuan, and an increase of 16.80 percent in a quarter-on-quarter comparison. In terms of liabilities, selling and repurchasing financial assets and bonds payable have increased to a certain extent, reflecting the company's initiative to expand the scale of financial investment.
Investment banking is a bright spot.
In the first three quarters of 2021, the net income of brokerage fees of the company was 4.811 billion yuan, up 15.54% from the same period last year; the net income from investment banking was 1.167 billion yuan, up 30.51% from the same period last year; the net income from asset management business was 938 million yuan, up 4.05% from the same period last year; the net interest income was 1.076 billion yuan, down 61.26% from the same period last year; and the income from investment and trading was 7.779 billion yuan, up 45.52% from the same period last year. It should be noted that the decrease in corporate interest income is mainly due to the expansion of liabilities caused by the increase in financial investment and the increase in interest payments. similarly, investment transaction income does not take into account the costs caused by the increase in liabilities.
If the net interest income is added with the investment transaction income, the net income of the asset business is 8.856 billion yuan, an increase of 9.00% over the same period last year. Overall, the investment banking business is the highlight of the company's three-quarter report, considering that the company has more reserves in the new third board business, the investment banking business performance is expected to continue to improve.
Profit forecast and investment advice
We forecast that the company's net profit from 2021 to 2023 will be 95.5, 11.60, and 13.72 billion yuan respectively, with a growth rate of 23.0 percent, 21.4 percent, 18.2 percent, 0.38, 0.46, 0.55 yuan, respectively, and the current share price will correspond to a PE of 13.4, 11.1, 9.4x, and 1.4, 1.2, and 1.1x. Considering the effect of the opening of the Northern Stock Exchange on the company's investment banking business, we maintain its "overweight" rating.
Risk hint
The decline of the market brings uncertainty to the performance and valuation repair of securities firms; stricter financial regulation; increased market competition; and the shift in monetary policy leads to higher financing costs.