Incidents:
The company announced the 2014 performance report of its participation in GF Securities. It expects operating income of 13.40 billion yuan, an increase of 63% over the previous year, and net profit of 5.02 billion yuan, an increase of 79% over the previous year, corresponding to EPS of 0.85 yuan.
Comments:
Continue to be optimistic about the revaluation of Pharmaceutical+Securities and maintain the rating for increasing holdings. Considering that the results of the pharmaceutical industry have not yet been announced, maintaining the profit forecast, the 2014-2016 EPS was 1.43/2.04/2.84 yuan, corresponding to PE23/16/11X. The company's pharmaceutical business is growing steadily. Against the backdrop of a bull market, GF Securities's investment income elasticity increased in 2015, which is expected to usher in a revaluation. Currently, the total market value of the company is 29.9 billion yuan, which only reflects the equity investment income of GF Securities. The corresponding market value of pharmaceuticals of 10 billion has not yet been reflected. There is plenty of room for improvement after the value is revalued, maintaining the “increase in holdings” rating, and the target price is 42 yuan.
With financing to expand shares, the performance of GF Securities is full of momentum. The performance of GF Securities achieved high growth in 2014. The express report revealed net profit of 5.02 billion yuan, higher than our previous forecast of 4.5 billion yuan. The return on net assets is around 14%, which is higher than the industry average. The growth in its performance was driven by an increase in transaction volume and an increase in the scale of credit transactions. It is expected that GF Securities will launch an H-share financing plan in the future. The scale of credit transactions will continue to expand in the future, and the share of innovative businesses such as capital brokerage will increase. Relying on a market-based operation mechanism, it is possible to pilot incentive methods such as employee shareholding.
The Guangfa Investment Bank has many project reserves and has benefited from the reform of the registration system. Relying on a market-based operation mechanism, GF Securities has 77 projects under review, ranking first in the industry, listing nearly 70 companies on the New Third Board, ranking third in the industry. Through GF Sindh as a direct investment business operation platform, GF is leading the industry. It is expected that after the registration system is implemented, GF Securities will be one of the most beneficial brokerage firms in the industry, relying on small to medium project reserves and the advantages of the entire investment bank business chain.
GF leads the industry in business innovation, and innovation continues under the dividends of reform. It is expected that the securities industry reform dividend will gradually be implemented in 2015. The issuance of stock index options and other instruments, the liberalization of “T+0” trading, the implementation of the “Shenzhen-Hong Kong Stock Connect” and the “registration system”, the increased leverage and net capital liberalization of brokerage firms, and the establishment of securities trading companies will all raise industry innovation expectations. Relying on a private-like operating mechanism, GF Securities has been a pioneering innovation standard-bearer in the industry over the years, and is expected to take the lead in benefiting from new business development/new licenses. For example, the industry recently took the lead in issuing certificates of benefit, and in the future, conditions are available to indirectly realize equity incentives through employee stock ownership plans.
Risk warning: risk of stock price fluctuations of GF Securities; impact of medical insurance fee control;