Key investment points: Headquartered in Zhejiang, deeply involved in the Yangtze River Delta, it has formed a “securities+futures+funds+asset management+venture capital” financial industry layout. The company's wealth management transformation continues to be upgraded, the investment banking business is striving to expand and strengthen, the proportion of active asset management management has increased dramatically, and public placement is progressing well. The reasonable value range is 12.26-12.98 yuan/share, maintaining the “superior market” rating.
[Event] Zheshang Securities announced its 2022 results: achieved operating income of 16.81 billion yuan, +2.4% year on year; net profit of the mother was 1.65 billion yuan, -24.7% year on year; corresponding to EPS 0.43 yuan, ROE 6.6%, -3.3pct year on year.
The fourth quarter achieved revenue of 5.23 billion yuan, +20.5% year on year and +26.9% month on month. Guimu's net profit was 500 million yuan, -18.0% year on year and +16.1% month on month. The company's revenue and net profit improved month-on-month in the fourth quarter, mainly due to the increase in investment bank revenue and a significant decline in management expense ratios. Furthermore, the sharp decline in the company's own income dragged down overall performance.
The advantages of characteristic wealth management brands were initially formed, and the business model was transformed from product sales to asset allocation. Brokerage revenue in 2022 was 1.87 billion yuan, -10.3% year on year, accounting for 11.1% of operating income. Influenced by market conditions in 2022, it became more difficult to sell financial products. Product sales were lower than in 2021. The company's revenue from selling financial products on behalf of the company was 303 million yuan, accounting for 16.2% of brokerage revenue, down 6.7 pct from the previous year.
The company promptly changed its business ideas, transitioned from a product sales model to an asset allocation model, and played a good combo of equity products and fixed income products. By the end of 2022, the company had a balance of RMB 17.2 billion, or -10% year on year, and its market share increased slightly to 1.1%. In 2022, the average daily stock trading volume of the entire market was 103 billion yuan, -9.3% year on year; the balance of the two loans was 15404 billion yuan, -15.9% year on year.
Strengthen project reserves and comprehensive service capabilities, and make every effort to expand the investment business. The company's investment banking business revenue in 2022 was 780 million yuan, -28.1% year on year. Investment bank revenue in the fourth quarter was 260 million yuan, +15.2% year on year and -0.1% month on month.
The underwriting scale of the company's equity business in 2022 was -22.9% year on year, and the underwriting scale of the bond business was -35.7% year on year. Shareholders' underwriting scale was 8.72 billion yuan, ranking 29th; of these, 4 IPOs raised 3.2 billion yuan; 6 were refinanced, with an underwriting scale of 5.5 billion yuan. The underwriting scale of bond owners was 81.1 billion yuan, ranking 22nd; among them, the underwriting scale of corporate bonds, corporate bonds, and financial bonds was 71.4 billion yuan, 6.9 billion yuan, and 2.8 billion yuan respectively. There are 8 IPO reserve projects, ranking 24th, including 4 on the main board of the two markets, 1 on the Beijing Stock Exchange, and 3 on the GEM market.
The share of active management has increased dramatically, and public funding is progressing well. The company's asset management business revenue in 2022 was 430 million yuan, +10.3% year on year. By the end of 2022, the asset management scale of Zhejiang merchants was 91.7 billion yuan, -14.3% year on year, of which 28 billion yuan was public offering, +33% year on year; active management was 89.2 billion yuan, +3.2% year on year, active management accounted for 97.3%, +16.4pct year on year. The active management business in 2022 showed strong resilience in a market environment where stocks and bonds fluctuated and declined. The average fiduciary asset management yield was 4.33%, which was basically the same as the previous year.
The decline in proprietary income dragged down overall performance; management expenses rates fell sharply. Investment income (including fair value) was 690 million yuan, -62.8% year on year; fourth quarter investment income (including fair value) was 0.2 billion yuan, -95.2% YoY and -94.1% YoY. We believe the main reason was the poor performance of the equity market, which saw a cumulative decline of 18.7% in the full year of 2022. Furthermore, in 2022, the company's management expenses were 2.98 billion yuan, or -21.3% year on year, and the management expense ratio was -5.3 pct to 17.7% year on year.
Investment advice: We estimate that the company's 2023-25E EPS will be 0.55, 0.66, and 0.85 yuan respectively, and the BVPS will be 7.21, 7.78, and 8.49 yuan respectively. Using a comparable company valuation method, we gave it 1.7-1.8xPb in 2023, corresponding to a reasonable value range of 12.26-12.98 yuan/share, maintaining a “superior market” rating.
Risk warning: The company's various businesses are highly correlated with the macroeconomic environment and capital market trends. In the event of regulatory changes, it will have a major impact on the company.