This report is read as follows:

Huachuang Securities business scale increased quarter by quarter, the company plans to implement stock incentives, capital superposition mechanism effect, optimistic about the continued growth of follow-up performance.

Main points of investment:

Maintain the "overweight" rating and lower the target price to 17.5 yuan per share. In the first three quarters of 2017, the company returned to its mother with a net profit of 227 million yuan, turning losses into profits compared with the same period last year; the company's Q3 net profit was 79 million yuan,-20% compared with the previous quarter, and the performance was lower than we expected. Huachuang Securities business scale increased quarter by quarter, the company plans to implement stock incentives, capital superposition mechanism effect, optimistic about the continued growth of follow-up performance. Considering the lower-than-expected results in the first three quarters, the company lowered its EPS in 2017-19 to 0.21 EPS 0.31 (0.49 yuan before the adjustment), lowered the target price to 17.5 yuan per share, and increased its holdings corresponding to 17P/B 2X.

The scale of business increases quarter by quarter, and under the protection of "capital plus mechanism", we are optimistic about the follow-up performance growth. 1) combined with the monthly data of Huachuang Securities, the revenue and net profit of 17Q3 Huachuang Securities are 416 million yuan, 17.6% and 15% respectively, which is expected to be mainly affected by the fluctuation of the non-standard business of the subsidiary company. 2) the total financial business income of the company in the first three quarters (handling fee + interest + proprietary investment income) is 29,994.3 million yuan respectively, steadily increasing. 3) at the end of the third quarter, the company's purchase and resale of financial assets (equity pledge) and financing (financing) increased by 36.5% and 7.1% compared with the end of the second quarter, and the growth rate was faster than the level of the second quarter, and the credit business continued to expand. 4) the scale of Huachuang Securities business increases quarter by quarter, the effect of capital increase appears, and is optimistic about the follow-up performance growth.

It is proposed to implement the stock incentive plan, and the incentive mechanism will be further enhanced. The company announced in October that it plans to implement a stock incentive plan, which includes the company's board of directors, the management of Huachuang Securities or core business personnel. The stock source is to issue new shares to the incentive target, buy back common shares in the secondary market, and grant no more than 10% of the total share capital. The above plan is expected to further enhance the company's incentive mechanism. At the same time, Huachuang Securities and Agricultural Bank Of China signed a strategic cooperation agreement, which is expected to reduce the company's financing costs and promote business expansion.

Catalyst: implementation of stock incentive plan.

Core risk: Huachuang Securities performance growth is not up to expectations.