Key investment points: Deeply cultivate the local market in Henan, be shortlisted for the first batch of “white list” brokerage firms, and major opportunities such as cooperation between the company and top institutions, and vigorously promote the upgrading of the company's main business lines and further optimization of the space layout. The target price is 4.49 yuan, maintaining a “neutral” rating.

[Event] Zhongyuan Securities announced its 2022 annual results: revenue for the full year of 2022 was 1.88 billion yuan, or -57.5% year on year; net profit of the mother was 110 million yuan, -79.2% year on year; corresponding to EPS 0.02 yuan, ROE of 0.8%. The fourth quarter achieved revenue of 430 million yuan, or -54.2% over the same period last year. Guimu's net profit was 4.26 million yuan, -74.1% year on year. The decline in the company's performance was far higher than the industry average, mainly due to a sharp decline in proprietary investment and commodity sales revenue.

Accelerate the upgrading of the company's smart wealth management through digital support, empowerment and management-driven guidance. The company's brokerage revenue in 2022 was 630 million yuan, -25.3% year on year, accounting for 33.6% of operating income. The average daily stock trading volume of the entire market was 103 billion yuan, -9.3% year on year. The company sold financial products on behalf of 23 million yuan, or -64.9% year-on-year, accounting for 3.6% of brokerage revenue. The scale of financial products sold on behalf of the company was 11 billion yuan, -10.0% year on year. The company's balance of two loans was 6.8 billion yuan, -15% compared to the beginning of the year, with a market share of 0.44%, which was basically the same. The total market balance of two loans was 15404 billion yuan, compared to -16% at the beginning of the year. The company's securities brokerage business completed the launch of 56 intelligent customer operation scenarios, achieved full customer life cycle operation for the first time, and built a digital marketing network. The company's “Caishengbao” app ranked 24th among brokerage firms in the overall ranking of the four major Internet operation indicators such as DAU and MAU. We have built a rich affiliate financial product line and established cooperative relationships with 44 fund companies in the industry.

The investment banking business is under pressure, and no IPO reserves may be limited in the future. The company's investment banking business revenue in 2022 was 270 million yuan, or -57.9% year on year. The underwriting scale of the equity business was -62.3% compared to the same period last year, and the underwriting scale of the bond business was -32.4% compared to the same period last year. Shareholders' underwriting scale was 4.29 billion yuan, ranking 40th; of these, 3 IPOs raised 2.4 billion yuan; 3 were refinanced, with an underwriting scale of 1.9 billion yuan. The underwriting scale of bond owners was 5 billion yuan, ranking 78th, all of which were corporate bonds. According to Wind statistics, up to now, the company has no stock IPO projects.

Revenue from the asset management business has increased, and the product system has been continuously improved. In 2022, the asset management business revenue of Central China Securities was 0.5 billion yuan, +25.6% year on year. The asset management scale was 3.8 billion yuan, +2.5% year on year. In 2022, the company's asset management business explored the working model of integrated investment and research, established three investment and research teams for fixed income, equity and FOF, continued to enrich the product line around changes in the market environment and customer needs, completed the public offering transformation of a large collection of products, and launched the “Zhiyuan Series” index enhancement products to gradually supplement the basic product system.

Dragged down by market conditions, the company's investment income declined. The company's investment income in 2022 (including fair value) was 540 million yuan, -47.6% year on year; fourth quarter investment income (including fair value) was 110 million yuan, -49.0% year on year.

[Investment advice] We expect the company's net profit per share for 2023E-2025E to be 0.11/0.11/0.13 yuan, respectively, and net assets per share of 2.99/3.14/3.29 yuan respectively. Considering the results of the company's digital transformation, the investment banking business continues to expand outside the province, and many businesses have growth potential. We gave it a slightly higher valuation level than the industry average, gave it 1.5x P/B for 2023, with a corresponding target price of 4.49 yuan, maintaining a “neutral” rating.

Risk warning: The trading volume is unstable, and investment income continues to decline/rise due to increased volatility in the equity market.