According to a CICC research report, Futu Holdings’ (FUTU.US) revenue in Q1 was estimated to total HK$1.6 billion, down 28% YoY and flat QoQ. The non-GAAP net profit was expected to be HK$582 million, down 51% YoY and up 9% QoQ. The non-GAAP net profit margin was predicted to be 36.5%, up 3.2% QoQ. CICC expects Futu Holdings’ revenue to remain solid based on effective cost control to drive net profit growth QoQ, believing that the overall performance will beats market expectations.

CICC expected an increase in Futu Holding’s client acquisition in Q1, as the online brokerage is expanding globally (U.S, Singapore and Australia), which contributed more than 50% of its new clients in Q1. In addition, against the downward pressure in the market, brokerages in the Hong Kong market will experience a consolidation, which will drive more quality clients to switch from other brokerages to Futu, thus helping Futu to further expand its market share.

The CICC report also said that Futu’s average daily turnover in the Hong Kong and U.S. stock markets rose 16% and 12% respectively in Q1, predicting that Futu’s brokerage commission in Q1 could go up by 9% YoY to HK$934 million (expected to account for 59% of its total revenue), which could be a result of an improved commission structure driven by the improved turnover rate and a bigger role of derivatives. However, as the report pointed out, Futu’s total revenue in Q1 was expected to be flat YoY as interest income (34% of its total revenue) and other income (7% of its total revenue) were expected to decline YoY against the market conditions.

CICC deemed Futu a potential winner in the consolidation of the online brokerage sector, as its long-term growth momentum will be fueled by continuous international expansion. Given the better-than-expected client acquisition in Q1 and easing regulation on platform economy, CICC kept the Outperform rating for Futu’s stock and raised the target price by 24% to $52, equivalent to 25x and 20x P/E forecasts for this year and next, with a potential upside of 55%.