GF Securities released the first quarter report of 2023. During the reporting period, it achieved operating income and net profit of RMB 64.77 and RMB 2,157 billion respectively, +35.7% and +65.6% year-on-year, respectively -15.0% and -20.0% month-on-month; weighted average ROE was +0.65pct to 1.87% year-on-year; operating leverage after excluding customer capital was 4.13 times, up 7.3% from the beginning of the year.

Investment revenue bottomed out to boost performance, and impairment losses turned back into increased profits. On the revenue side, in 2022, the company achieved revenue of 3.721 billion yuan from the fee business, -12.6% year on year, and achieved capital business revenue of 2,655 billion yuan. The year-on-year loss turned into a profit. Market trading activity declined compounded by a slowdown in issuance, which put pressure on the fee business, and capital business revenue improved marginal under market recovery; on the expenditure side, management expenses fell 3.15 pct to 56.3% year on year, credit impairment losses turned back to 65 billion yuan, stock pledge scale continued to drop, asset quality declined Further consolidation.

Asset management has distinct characteristics, and the investment banking business is awaiting recovery. In terms of fee-related businesses, net income from brokerage, investment banks and asset management was $1,477, 1.01, and 2,087 billion, respectively, compared to -12.5%, -32.9%, and -10.8%, respectively. The decline in brokerage revenue was mainly affected by the decline in market trading activity. Q1 market stock transactions were -7.6% year-on-year, corporate purchases fell 0.2% from the beginning of the year to 137.34 billion yuan, and Q1 corporate equity fund holdings increased 1.3% month-on-month to 83.2 billion yuan, ranking third in the industry. Q1 The company did not participate in equity financing projects. The IPO scale for the same period last year was 1,127 billion yuan, and Q1 participated in bond financing of 39.6 billion yuan, an increase of 11.5% over the previous year. The investment banking business is still under pressure in the short term. The company's asset management advantage is stable. As of the end of March 2023, its E-Funda Fund and Guangfa Fund's non-commodity public funds were 100.5 billion yuan and 666.7 billion yuan respectively, ranking first and third in the industry respectively.

Proprietary investment is picking up in an orderly manner, and de-directed transformation is accelerating. In terms of capital business, net interest income was 937 million yuan, or -5.4% year on year, and income from investment business was 1,717 million yuan, turning a loss into a profit over the previous year. Interest expenses increased 12.0% year-on-year, mainly due to the continuous increase in operating leverage and capital costs. At the end of March 2023, capital was loaned and purchased and resold of financial assets +4.0% and -18.1% compared to the beginning of the year to 861.31 and 15.507 billion yuan; investment income and fair value change profit and loss were reduced to surpluses of 1,555 million yuan and 213 million yuan respectively. Q1 company's transactional financial assets and derivative financial assets rose to +32.8%, +8.6% year-on-year to 209.499 billion yuan and 28.69 million yuan respectively, bonds, and RMB 28.69 million. Funds and derivatives positions have increased markedly, and the decentralization and transformation of proprietary businesses has accelerated, which is expected to enhance the stability of investment performance.

The trend of company expansion continues, and the advantages of asset management business are outstanding. After public funds enter the next boom cycle, asset management business repricing is expected to open up valuation space. We adjusted our profit forecast. Net profit attributable to the mother in 2023-2024 was 91.43 and 10.50 billion yuan, +15.3% and +9.9%, respectively. The closing price on April 28, 2023 corresponds to PB 0.98 and 0.90 times respectively, maintaining the “increase in holdings” rating.

Risk warning: the risk of large fluctuations in the capital market, the risk of macroeconomic downturn, the risk that the market share increase falls short of expectations, and the risk that the promotion of new business falls short of expectations.