The net profit of 2021 is from + 56.5% to 1.62 billion yuan compared with the same period last year, mainly due to: 1) the income of 840 million yuan from the changes in the fair value of the share options of Huaxing Securities; 2) Huaxing Securities turned a loss to 80 million yuan in 2021; 3) the operating profit of investment banking business was + 6.6% to 310 million yuan compared with the same period last year. After deducting the change in the fair value of share options, the net profit of return to the mother is 780 million yuan,-23.4% compared with the same period last year. We judge that it is mainly due to the decline in net investment income caused by changes in the valuation of projects invested in the investment management business. Group annualized ROE+6.7% to 25.5%.
First, investment banking business: underwriting and distribution is rising steadily, and the synergy in the primary and secondary markets is increasingly affected by the policies of Chinese stocks. The United States and related capital markets are under greater pressure in the second half of 2021. The income of private financing consultants is-9.6% to 540 million yuan compared with the same period last year, and the transaction scale ranks first in the private financing market for 17 years in a row. The income of IPO underwriting and brokerage business is 47.1% to 350 million yuan / 190 million yuan respectively compared with the same period last year. The stronger secondary market distribution ability will further strengthen the underwriting business, and the synergy effect is becoming more and more obvious. The investment banking business made a profit of 310 million yuan in 2021, a year-on-year increase of 6.6%.
Second, investment management business: the pre-fund has entered the withdrawal period, and the profits contributed by carry will soon be affected by market fluctuations and project withdrawal. AUM will drop 15% to 48.85 billion yuan, and management fees will be-2.8% to 410 million yuan compared with the same period last year. The US dollar four-issue fund 2021Q3 completed its first hurdle at the end of the year, driving the fee-charging AUM to increase by 8.6% to 23.76 billion yuan. at the same time, the RMB four-issue fund will be raised at 2022H1, and the increase in management fee income is expected to be reflected in 2022.
In 2021, the fund withdrew 8.6 billion yuan from the project, the return on investment reached 3.6 times, and the company realized carry income of 30 million yuan. By the end of 2021, the company's cumulative realized Carry income (the project has been withdrawn, included in the income statement) is 90 million yuan, and the cumulative unrealized carry income (not included in the income statement) is 4.53 billion yuan. 51% of the carry is contributed by the first and second phase of the fund (raised in 2013-2015), which has entered the withdrawal period. We expect that unrealized carry will be gradually transformed into realized carry in 2022-2025, contributing revenue and profits to the company. The investment period of the third phase of the fund has been completed in 2021, and many projects will be listed in 2022 to contribute to carry.
The net investment income is-49.2% to 470 million yuan compared with the same period last year, which is mainly due to the change in the valuation of the project invested. Among them, the proportion of realized investment income has significantly increased to 90%, compared with most of the net investment income in previous years is the buoyancy caused by changes in fair value. In 2021, the profit of the seniority management business was 540 million yuan,-43.3% compared with the same period last year. We judge that with the market adjustment, the risk of the underlying assets may have been fully released, and the investment income will further contribute to profits in the future.
Third, Huaxing Securities: operating performance is at an all-time high, with net profit turning into profits. In 2021, Huaxing Securities achieved an income of 410 million yuan, + 61% compared with the same period last year. Among them, the transaction and consultant income was + 107.4% to 120 million yuan compared with the same period last year, mainly due to the increase in stock underwriting income caused by Science and Technology Innovation Board's IPO sale and gem supporting trading; the net investment income was + 55.9% to 260 million yuan compared with the same period last year, mainly benefiting from the follow-up investment income of the A-share gem IPO project. In 2021, China Renaissance Holdings Ltd. 's net profit reached 20 million yuan, turning a loss into a profit compared with last year.
Other: wealth management business AUM has grown steadily, and by the end of 2021, wealth management AUM increased by + 144% to 9.4 billion yuan compared with the same period last year.
Profit forecast and valuation: we estimate that the company's homing net profit from 2022 to 2024 will be 1.64 trillion yuan, 1.92 billion yuan, respectively, compared with the same period last year, + 0.8%, 17.4%, 25.3% respectively. Using the segment valuation method, the investment banking business is valued at 7 cents / E, or 2.708 billion yuan, in 2022; the investment management business is valued at 5 cents / E, or 6.074 billion yuan, in 2022; Huaxing Securities is valued at 0.4 cents / B, and the 63.8% stake held by the group is valued at 697 million yuan. In view of the strong cooperation of the three major businesses, there is no discount. Overall, China Renaissance Holdings Ltd. is valued at about 9.479 billion yuan (equivalent to about HK $11.7 billion) in 2022, corresponding to the target price of HK $21.27.
Risk hints: large fluctuations in the capital market; intensified market competition; uncertainty of investment banking growth; less than expected newly raised funds; cross-market selection of comparable companies