On December 30, 2022, the China Securities Regulatory Commission put forward rectification requirements for Internet brokers such as Futu Tiger to carry out cross-border securities business for domestic investors. Futu said that the company will cooperate with the corresponding rectification work in strict accordance with the regulatory requirements. At the same time, it will also regulate cross-border securities business for Chinese domestic investors in accordance with the law.
CITIC said in a report released on January 1 that the CSRC rectification plan is to regulate the tone of Futu's domestic development, which makes it clear that the company's stock customer business can be retained. With the gradual improvement of the financial services ecosystem and the continuous improvement of the level of internationalization, Futu is expected to achieve better development on the road of legal compliance in the long run, giving Futu Holdings Limited a target price of US $58.20 and maintaining a "buy" rating.
Reasons
The CSRC has given a clear rectification and reform plan, which is the regulation of Futu's domestic business development.
The rectification and reform plan has greatly stabilized the basic customer base of Futu, and there are no restrictions on the transfer of other legal funds, leaving room for the long-term development of Futu.
As one of the top three listed Internet brokers in the world, the China Securities Regulatory Commission provides clear regulatory guidance, which is conducive to the company entering a new stage of development.
Since 2021Q4, 90 per cent of Fortune's new customers have come from Hong Kong and overseas markets. Much progress has also been made in the emerging wealth management and corporate services businesses. The international business model has become a new label for the development of Fortune.
Valuation and rating
With the landing of the regulatory policy for Internet brokers and the elimination of the uncertainty of Fortune's basic customer base, we are still optimistic about the long-term development of Fortune, giving Futu Holdings Limited 23 times PE in 2022, with a target market capitalization of US $8.4 billion and a corresponding target price of US $58.20, maintaining a "buy" rating.
Risk factors.
Regulatory measures have further upgraded, overseas market expansion is not as fast as expected, overseas regulatory uncertainty, Internet brokerage competitors and traditional securities firms impact more than expected, wealth management and corporate services business development is less than expected, H-share listing uncertainty.