Matters:
GF Securities released its 2022 annual report, with operating income of 25.1 billion yuan (-26.6% year on year), net profit of 7.9 billion yuan (-26.9% year on year), weighted average ROE of 7.23% (-3.44pct year on year); total operating income of 22Q4 was 7.6 billion yuan (+3.2% YoY), and Guimo's net profit was 2.7 billion yuan (+21.8% year on year).
Commentary:
Benefiting from equity ownership, Q4 performance exceeded expectations. The annual revenue from heavy capital business (proprietary business+credit business) was 5.37 billion yuan (-49.8% year-on-year), and 22Q4 was 2.32 billion yuan (+20.4% year-on-year). On the asset side, leverage increased significantly. Leverage at the end of the period was 7.67 times (+1.43 times year on year), and asset utilization efficiency improved. The asset size of the heavy capital business was 403.5 billion yuan (+14.6% year on year), incremental assets were invested in self-operation: self-operated assets of 301.7 billion yuan (+28.4% YoY), two finance assets of 82.8 billion yuan (-14.8% YoY), and equity business assets of 18.9 billion yuan (-5.3% YoY).
① Proprietary business: Significant improvement in the fourth quarter. Changes in fair value in 2022 plus net investment income of $1.27 billion (-78.0% YoY), compared to $1.31 billion in the fourth quarter (+91.6% YoY). At the end of 2022, the company's own equity accounted for 13.3%. The equity market went live in the fourth quarter, which led to an increase in the company's proprietary business revenue. It is expected that self-operated business will continue to rise in 2023Q1.
② Credit business: Interest income in 2022 was $12.86 billion (-5.9% YoY), compared to $3.31 billion in the fourth quarter (-6.3% YoY). Although there has been a decline in the scale of the two finance business, it is mainly a decline in market demand. The share of the company's two financial loans reached 5.38% (+0.34pct year-on-year), with significant growth. The stock quality business scale was 18.94 billion yuan (-5.3% year-on-year). Credit impairment losses were converted back to $3.7 billion.
The share of the public fund business in the net profit of the parent company increased to 25.6%. Revenue from asset management business was 8.94 billion yuan (-10.1% YoY). Its subsidiaries, Guangfa Fund and E-Fangda Fund, contributed a total of $2.03 billion to net profit attributable to the mother, accounting for 25.6% of the Group's net profit (+3.1pct over the previous year). (1) GF Fund: Operating income of 8.39 billion yuan (-10.2% YoY), net profit of 2.13 billion yuan (-18.2% YoY), ROE 21.0% (-7.6pct year on year); net profit attributable to GF Securities of 1.16 billion yuan. (2) E-Fonda Fund: Operating income of 13.92 billion yuan (-4.4% YoY), net profit of 3.84 billion yuan (-15.4% YoY), ROE of 26.2% (-10.1pct year on year). Net profit attributable to GF Securities was $8.7 billion (including net investment income from joint ventures).
The restoration of the investment banking business is obvious. (1) Investment banking revenue in 2022 was 610,000 yuan (+41.1% YoY) and 170 million yuan in the fourth quarter (+89.3% YoY). Revenue increased markedly, and business recovery was evident. The IPO scale was 2.94 billion yuan (0 in the same period last year); the refinancing scale was 15.46 billion yuan (10.85 times that of the same period last year). The debt amount was 142 billion yuan (+358.4% year-on-year). (2) Brokerage revenue was 6.39 billion yuan (-19.9% YoY) and 1.43 billion yuan (-26.9% YoY) in the fourth quarter. The market share of the stock base trading volume was 4.45% (+0.30pct year-on-year), and the market share continued to grow.
Investment advice: Benefiting from the high share of equity independent investment, the upward market conditions in the fourth quarter, and the company's own business grew significantly, driving the Group's net profit in the fourth quarter to exceed expectations. The investment banking business continues to recover, and the scale of various underwriting activities has increased markedly. Under the general trend of wealth management, we continue to be optimistic about the increase in performance brought about by the growth of the company's asset management business and the further restoration of the investment banking business. Based on the economic environment and market risk appetite adjustments, we gave an EPS forecast of 1.57/1.84/2.28 for 2022/2023/2024 (2023/2024 original forecast: 1.26/1.48 yuan), BPS of 15.50/16.73/18.27, corresponding PB of 1.02/0.94/0.86 times, and ROE of 10.14%/10.99%/12.49% respectively. Based on changes in the market environment and comparable valuations in the industry, we gave the 2023 PB valuation 1.3 times, corresponding to the target price of 20.1 yuan. Maintain a “Recommended” rating.
Risk warning: market trading volume has declined; risk appetite has declined; capital market innovation falls short of expectations; domestic and global epidemics have repeated and worsened; and the recovery of the real economy has fallen short of expectations.