Main points of investment

1. The market share of stock-based turnover remained stable, the commission rate rebounded, and the revenue of 2017H1's brokerage business totaled 450 million yuan, down 29% from the same period last year, in line with the decline in market trading volume. The market share of stock-based turnover is 0.99%, ranking 27th in the industry, down 0.04 percentage points from the market share for the whole of 2016, basically stable. The average commission rate of the company's Q2 is 3.60%, up 4% from 3.47% in the first quarter. The company continued to promote channel construction, and seven new branches were approved during the reporting period, including five branches in Chongqing, Chengdu, Hangzhou, Guangzhou and Xi'an. More than 60% of the company's net income from securities trading comes from Fujian, and the establishment of branches outside the province is expected to continue to maintain the leading edge in the province while strengthening regional business coverage.

2. The number of IPO projects in the meeting has increased, and the growth rate of asset management scale has slowed down.

The company achieved 284 million yuan in investment banking revenue in the first half of the year, down 32% from the same period last year. During the reporting period, there were 9 equity main underwriters (16th in the industry, down 5 places), including 3 IPO and 6 single equity refinancing, raising a total of 12.1 billion yuan (18th in the industry, up 1 place), and 7 bond underwriters with a total amount of 11 billion yuan. In the first half of 2017, the company reviewed 11 IPO projects, ranking 19th in the industry, while only 5 IPO reserves in the same period last year, and may be able to achieve results in the second half of the year. The revenue from 2017H1's asset management business was 241 million yuan, down 36% from the same period last year. The total amount of assets under management totaled 119.1 billion yuan, an increase of 18% over the end of last year, of which the scale of pooled capital management was + 2%, with a slower growth rate.

3. Regional advantages + shareholder resources, outstanding business coordination

Relying on the strong comprehensive financial layout and resource advantages of China Oriental, the controlling shareholder, Dongxing Securities excavates projects and shares customer resources in investment banking, asset management, investment and other fields. In the first half of 2017, the cumulative scale of the collaborative business carried out by the company and the group was nearly 100 billion yuan, and the total revenue of the collaborative business is expected to increase by 13.59% over the same period last year. After China Oriental was listed last year, it will further introduce strategic investors, integrate domestic and foreign resources, and deepen the coordination strategy. Dongxing Securities will continue to benefit greatly from shareholder resources. At the same time, the company signed a strategic cooperation agreement with Beijing Fujian Enterprise General Chamber of Commerce, involving nearly 5000 enterprises of multi-industry scale, and the two sides will carry out extensive and in-depth cooperation in the field of capital market and business scope.

4. Investment advice:

Dongxing Securities business in the first half of the year is lower than the industry average, mainly subject to market factors, while investment banking, asset management and other business income has not been realized. The company's shareholder resources and regional advantages are outstanding, and the business structure is more balanced. At the same time, CSC significantly increased its shareholding, with a shareholding ratio of 4.06%, making it the largest tradable shareholder of the company.

Looking forward to the stable development of the company in the future, it is estimated that the EPS of 2017, 2018, and 2019 is 0.45, 0.50 and 0.57, respectively, and the corresponding PE is 40.21, 36.28, 31.88 times.

Risk factors: market environment remains in the doldrums