Event: according to the company's report, 2017H Baoshuo achieved a total operating income of 980 million yuan (YoY + 530%), operating income of 250 million yuan (YoY + 60%), and a net profit of 150 million yuan for the parent company. The substantial increase in performance was mainly due to the fact that Huachuang Securities had not yet been included in the merger in the same period last year. We believe that the main marginal changes of the company are: (1) continuous diversification of proprietary business investment structure; (2) stable development of financial and investment banking business; and (3) establishment of Xinggui investment and further improvement of non-standard assets business system.
Huachuang Securities Capital replenishment, active layout of alternative investment. After completing the major asset restructuring and raising supporting funds, the company holds 97.44% of the shares of Huachuang Securities. Huachuang Securities achieved operating income of 840 million yuan, net profit of 180 million yuan and net assets of 10.7 billion yuan in the first half of 2017. The company will be gradually reorganized into a shareholding management platform with securities business as the core.
(1) increasing capital to promote the steady development of brokerage credit business. 2017H Huachuang Securities brokerage business fee and commission net income of 140 million yuan. According to Choice, the market share of stock-based trading in Huachuang Securities has fallen slightly to 0.25% (almost the same as in 2016). Relying on the integrated financial service platform, Huachuang Securities will enhance the intelligence of Internet services and establish and improve the "big brokerage" service system, which will help to continuously promote its market share. Huachuang Securities is expected to increase its market share to about 0.27% in 2017.
According to Wind statistics, the balance of Huachuang Securities financing and financing business so far is 1.8 billion yuan, and the market share has risen to 0.2%. With the replenishment of capital, Huachuang Securities credit business will develop steadily, and the company's margin trading scale is expected to reach 2 billion yuan in 2017.
(2) self-management enriches the investment structure and capital management strengthens regional advantages. The investment income of 2017H Huachuang Securities is 290 million yuan. According to the fund-raising purpose disclosed in the previous announcement, Huachuang Securities plans to allocate about 3 billion yuan to increase the scale of proprietary business, of which equity securities invest about 500 million yuan to enrich the variety of self-investment and optimize the business structure. In terms of asset management business, 2017H Huachuang Securities achieved 120 million yuan in asset management business income, and the scale of pooled capital management rose to 4.1 billion yuan, gradually forming a regional market centered on Guiyang, Beijing, Shanghai, Shenzhen and Chengdu.
(3) Investment banking has a certain competitive advantage. 2017H Huachuang Securities achieved an investment banking income of 120 million yuan. Based on traditional investment banking business, Huachuang Securities has made some progress in non-traditional investment banking markets such as private bonds and recommended listing business for small and medium-sized enterprises. According to Wind statistics, as of August 29, 2017, Huachuang Securities has accepted and reported 8 IPO projects, ranking 23rd in the industry in terms of reserves, and project reserves have a comparative advantage among securities firms of similar size.
(4) improve the non-standard business system. Huachuang Securities is one of the first batch of brokers to pilot Internet securities, and by controlling Guizhou Stock Exchange Center, Wine Exchange and other companies, the first "Internet + underlying Capital Market" non-standard asset securitization service model was established, and an alternative wholly-owned subsidiary Xinggui Investment was set up in early May 2017 to further improve the non-standard assets business system and form the competitive advantage of "securities dealers + financial asset exchanges".
The construction of Xiongan New area creates business development opportunities.
(1) the infrastructure in the new district is expected to bring more opportunities to the building materials business. Integrated company 2016 annual report and 2017 mid-year report, most of the company's building materials business income from North China, the production of "Baoshuo" brand plastic pipe profile products have a certain brand awareness and share.
(2) Securities business has the opportunity to seek business opportunities in Xiongan. The construction of Xiongan New area is a national key strategy, and there is a great demand for financial services in the process of building the new area. Huachuang Securities is expected to have the opportunity to benefit.
Investment advice: buy-An investment rating, 6-month target price of 22 yuan. We expect the company's EPS from 2017 to 2019 to be 0. 31 yuan and 0. 9 yuan respectively. 38 yuan, 0.46 yuan.
Risk tips: market risk, operational risk, policy risk