BoCom International had an operating loss of HK $690 million in the first half of 2022, from profit to loss in the same period last year, with an operating income of HK $1.19 billion in the same period in 2021; a net loss of HK $1.67 billion, from profit to loss in the same period last year, lower than our forecast and a net profit of HK $560 million in the same period in 2021; no dividend is paid in the middle of the year. Affected by the epidemic, the default of US dollar bonds in the inner house, and the increase in interest rates by the Federal Reserve, the capital market of Hong Kong stocks was in the doldrums. In the first half of the year, the company's income from all business lines declined to varying degrees, of which the company suffered a substantial loss in its own business, which was the main factor causing the company's overall performance loss.

Affected by the market downturn, corporate brokerage, investment banking, asset management and margin financing income declined compared with the same period last year. In the first half of 2022, the average daily trading volume of the Hong Kong stock market was 136.8 billion Hong Kong dollars,-28% compared with the same period last year. Affected by the decline in market trading volume, the company's brokerage revenue was HK $64 million,-38 per cent year-on-year. Meanwhile, the company's total margin loans fell 17% from the beginning of the year to HK $1.8 billion. Margin loan interest income is-42% to HK $60 million compared with the same period last year. Investment banking business, due to a sharp decline in corporate customers' willingness to issue, stock and bond underwriting income has been affected. The overall financing scale of Hong Kong stocks shrank significantly in the first half of 2022, with IPO-90 per cent and refinancing-65 per cent year on year. The company's investment banking revenue was-69% to HK $25 million compared with the same period last year. In terms of asset management, affected by the downward market, the company's asset management scale is-21% to HK $32.8 billion compared with the beginning of the year, and its management income is-19% to HK $20 million compared with the same period last year.

Proprietary trading lost a lot of money, and the provision of assets increased significantly. In the first half of 2022, the Hang Seng Index was-7% and the Chinese dollar bond price index was-41%. Affected by the sharp fluctuations in the capital market, the company suffered a substantial loss of HK $1.3 billion in proprietary trading in the first half of 2022, turning from profit to loss compared with the same period last year, including HK $390 million in guaranteed income payments to asset management clients and HK $880 million net loss on equity investments in stocks, bonds and Pre-IPO. At the same time, the provision for impairment of corporate assets, mainly bonds and loans, increased sixfold to HK $400m compared with the same period last year. The company's management said that the company has significantly reduced its equity exposure and the size of bond investment (FVPL) has continued to decline. The follow-up company will aim at optimizing asset structure and reducing high-risk assets, control the scale of total assets, vigorously develop light asset business, enhance the competitiveness of light asset business, promote the coordinated development of licensed business and asset business, and improve the stability of the company's development.

[investment advice] affected by the epidemic, the Fed raising interest rates, the risk of default on internal housing dollar debt, weak global economic growth and other factors, we believe that the company's business environment is still facing greater challenges and uncertainties. We downgrade the company's profit forecast and estimate that the company's EPS for 2022-2024E is-HK $0.88 and BVPS is HK $1.05 and 1.41 respectively. We use GGM to value the company, corresponding to the target price of HK $0.58 (down 63%), with a target valuation multiple of 0.56x 2022EP/B, maintaining a "better than the market" rating.

Risk hint: the continued downturn in the market leads to a decline in the scale of business, and increased volatility in the capital market leads to lower-than-expected investment returns.