In September 2014, Pacific (601099.CH/RMB 7.01, purchase) achieved operating income of 208 million, an increase of 232% over 62.7 million in the same period of the previous year, an increase of 104% over the previous year; net profit attributable to shareholders of the parent company was 105 million yuan, an increase of 397% and an increase of 183% over the same period last year. We are still optimistic about the company's outstanding achievements as representatives of private brokerage firms in the gradual use of sufficient capital and leverage, the marketization of talents, and flexible and reasonable incentive mechanisms. Since 2013, the company's various business qualifications have been liberalized, and in the context of private brokerage firms, the development and operation has reached a critical inflection point. The medium- to long-term investment value is outstanding, and the continuous sharp improvement in the company's performance has gradually proven to the market. We continue to be optimistic about Pacific's performance growth and stock price performance, maintain the buy rating, and continue to strongly recommend it.
The company's capital is sufficient and leverage is gradually used: after the fixed increase was completed, the company's net assets leapt from 2 billion to 6 billion dollars. The capital raised by the fixed increase has had a positive impact on the development of various business lines (especially credit business), and it is expected that the company will also increase its return on net assets by gradually increasing leverage.
The company is a brokerage firm with a private background, and the pace of innovation is firm: the company has the flexibility unique to private enterprises, and the company's positioning and development strategy are clear. The short decision chain brought about by the private sector background enabled the company to make rapid progress and firm pace in innovation and financial reform. The company actively adapts to the Internet finance wave and establishes a professional Internet finance team to explore the development of related businesses.
Qualifications for innovative business were obtained, and the company recruited market talents: With the acquisition of qualifications such as asset management business, brokerage firms hosting the New Third Board, and securities financing business, the company embarked on a normal development path. The company spared no effort to recruit outstanding talents from the vice president level to the sales outlets. The acquisition of business qualifications, effective incentive mechanisms, and Pacific development prospects enabled the company to attract talents from all walks of life, including the former head of Western Securities's New Third Board business.
Location advantages are becoming more and more obvious: Yunnan Province has convenient transportation, various cities have airports, and the Shanghai-Kunming high-speed railway will be opened in 2015. Kunming is very important as China's “bridgehead” for ASEAN countries, especially during the period of policy promotion in the Yunnan-Gui-Myanmar Financial Pilot Zone. As economic cooperation between China and ASEAN countries becomes closer, the construction of the Maritime Silk Road will provide business opportunities for mergers and acquisitions, asset securitization, and overseas investment banks, and the company will benefit first as a local regional brokerage firm.
According to the September operating data released by 18 listed brokerage firms (excluding Huatai Securities [601688.CH/RMB 9.35, no rating]), net profit reached a total of 4,602 million yuan. After excluding the consolidated national net profit of 82 million yuan from Fangzheng Securities (601901.CH/RMB 6.30, careful purchase), it increased 60% month-on-month and 53.36% year-on-year. Listed brokers' performance generally rose sharply. Pacific Securities, on the other hand, had an impressive record of 397% year-on-year increase, far higher than other listed brokerage firms. We forecast the company's earnings per share for 2014-2016 at $0.129, 0.188, and $0.229, respectively.
Considering that the company's monthly performance growth rate in the second half of the year was above 100%, we maintained our buying rating, with a target price of 12.03 yuan.
