Event: in the first three quarters of 2017, Baoshuo achieved a total operating income of 1.51 billion yuan (YoY+ 229%), operating income of 320 million yuan (YoY+26%), and a net profit of 230 million yuan for the parent company, turning losses into profits. We believe that the main marginal changes of the company are: (1) carrying out comprehensive strategic cooperation with Agricultural Bank Of China; (2) launching employee equity incentive plan.
Huachuang Securities has steadily improved its performance and actively distributed alternative investments. According to monthly statistics, Huachuang Securities, the company's holding subsidiary, achieved an operating income of 1.27 billion yuan in the first three quarters of 2017, an increase of 51 percent over the first half of 2017, and a net profit of 280 million yuan, an increase of 56 percent over the first half of the year, with net assets reaching 10.7 billion yuan. 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. As of the first half of the year, Huachuang Securities brokerage business fee and commission net income of 140 million yuan. According to Choice statistics, the market share of the stock-based trading volume of Huachuang Securities remained 0.25% in the first three quarters (basically the same as in the first half of the year), with a balance of 1.8 billion yuan and a market share of 0.2%. 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.
(2) enrich the investment structure by oneself. Huachuang Securities achieved an investment income of 450 million yuan in the first three quarters. 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.
(3) Investment banking has relative competitive advantage. As of the first half of the year, 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 October 27, 2017, Huachuang Securities has accepted and reported 8 IPO projects, ranking 19th 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. By holding Guizhou Stock Exchange Center, Wine Exchange and other companies, Huachuang Securities pioneered the non-standard asset securitization service model of "Internet + underlying Capital Market" and set up an alternative wholly-owned subsidiary Xinggui Investment in early May 2017. we will further improve the business system of non-standard assets and form the competitive advantage of "securities dealers + financial assets exchanges".
The construction of Xiongan New area provides potential business opportunities. During the 19th CPC National Congress, government officials said that the planning of Xiongan New area has reached a critical stage, and the demand for infrastructure is expected to be released. 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. There is a great demand for financial services in the process of the construction of the new area, and Huachuang Securities has the opportunity to find business expansion opportunities in the construction of the new area.
Issue employee stock ownership plan and strengthen employee motivation. The company plans to carry out an equity incentive scheme for directors, senior managers and core personnel such as the management of Huachuang Securities, a holding subsidiary, and the shares to be granted are expected to not exceed 10% of the total issued share capital of the company at the time of the grant. The introduction of equity incentive scheme will help to enhance the enthusiasm of the company's core management and business personnel, so as to promote the company's business development and business performance.
Hand in hand with Agricultural Bank Of China to enjoy channels, financing and brand dividends. The company has signed a "Comprehensive Strategic Cooperation Agreement" with Agricultural Bank Of China to carry out in-depth cooperation in the areas of cross-selling, financial innovation cooperation and cross-promotion. The company can enjoy wider sales channels, lower financing costs and more publicity brought by partners, which is good for the company's business development and cost reduction.
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 hint: the risk of substantial decline in trading volume / operational risk / equity incentive cannot be landed