Key investment points: The company is characterized by fixed income and is a scarce target among existing listed brokerage firms. We are committed to building a securities company with fixed income characteristics and asset management business as the core. The target price is 5.94 yuan, maintaining a “neutral” rating.

[Event] The company announced results for the full year of 2022 and the first quarter of 2023: revenue was 2.61 billion yuan in 2022, -19.8% year on year; net profit of the mother was 400 million yuan, -46.2% year on year; corresponding to EPS of 0.10 yuan and ROE of 2.8%. The first quarter of 2023 achieved operating income of 690 million yuan, +30.2% year on year; net profit of the mother was 140 million yuan, +96.0% year on year; corresponding to EPS of 0.03 yuan and ROE of 1.0%. The company's performance declined markedly in 2022, mainly due to poor market performance, which led to a decline in revenue from many businesses such as brokerage and self-employment. In particular, self-operated businesses lost money in the first and fourth quarters. The sharp recovery in the company's performance in the first quarter of 2023 was mainly due to the warming of the equity market, and the company's own income turned a loss into a profit.

By increasing collaboration, the company continues to promote the transformation to wealth management. The company's brokerage revenue in 2022 was 380 million yuan, -19.1% year on year, accounting for 14.7% of operating income. The company sold financial products on behalf of 18.54 million yuan, or -34.2% over the same period last year, accounting for 4.82% of brokerage revenue. The scale of financial products sold on behalf of the company was 10.1 billion yuan, +12.0% over the same period last year. Brokerage revenue in the first quarter of 2023 was 88.77 million yuan, -8.9% year on year, accounting for 12.7% of operating income. In the field of securities brokerage business, the company continues to promote the transformation to wealth management, complete the organizational restructuring of the brokerage headquarters, and carry out efficient management and business empowerment of branches.

The investment banking business continues to adhere to the “focus on region, focus on industry” development position to help enterprises grow bigger, better and stronger through the capital market. In 2022, the company's investment banking business revenue was 280 million yuan, -9.1% year on year. The underwriting scale of stocks and bonds was +1.7% and -3.7%, respectively. In the first quarter of 2023, investment banking revenue was 46.06 million yuan, or 39.8% over the same period last year. The underwriting scale of stocks and bonds was -89.3% and -25.4% compared to the same period last year. Shareholders' underwriting scale in the first quarter of 2023 was 400 million yuan, ranking 41st; refinancing 1 company. The underwriting scale of bond owners was 2.5 billion yuan, ranking 60; among them, the underwriting scale of corporate bonds and ABS was 1.3 billion yuan and 1.2 billion yuan respectively.

There are 3 IPO reserve projects, ranked 30th, all of which are GEM.

The characteristics of fixed income are obvious, and it has achieved a leading position in the market. In the field of fixed income business, the company already has a brand advantage and has formed a unique sales and trading model suitable for the development of medium-sized brokerage firms. 1) Fixed income sales: As an established fixed income product sales team, the company deeply covers investment institutions such as banks, funds, insurance, trusts, private placement, finance companies, etc. In 2022, the company made significant progress in customer expansion, and the total number of institutional clients of all types increased by 42.37% year-on-year. The total sales amount of the company's fixed income products in 2022 was 173.292 billion yuan, or -4% year-on-year. 2) Trading: The trading volume of bonds in the corporate interbank and exchange markets was 6.95 trillion yuan, +77% over the same period last year; the market trading volume in the interbank market was 2.43 trillion yuan, +95% year on year.

We are committed to becoming a securities company with fixed income characteristics and asset management business as the core. Asset management business revenue in 2022 was 1.03 billion yuan, +11.8% year on year. Revenue was $230 million in the first quarter of 2023, -6.9% year on year. The asset management scale at the end of 2022 was 55 billion yuan, -5.9% year on year. The company continues to improve active management capabilities and product creation capabilities, enrich investment varieties and product lines with customers at the center, create ESG and FOF investment first-mover advantages and ABS business characteristics, lay out public offering REITs business, issue public welfare asset management products, and consolidate investment research and risk control capabilities.

[Investment advice] We expect the company's net profit of 2023E-2025E to be 572 million yuan, 632 million yuan and 696 million yuan respectively, +43%/+11%/+10% year-on-year respectively. Net profit per share is 0.14/0.15/0.17 yuan respectively, and net assets per share are 3.71/3.85/3.98 yuan respectively. We gave it 1.6x 2023E PB (considering that the company is characterized by fixed income, is a scarce target among existing listed brokerage firms, and asset management actively managed products have the highest yield, an appropriate valuation premium), corresponding to the target price of 5.94 yuan, maintaining a “neutral” rating.

Risk warning: Continued market downturn has led to a decline in business scale, and market supervision has been further strengthened.