Event: in the first half of 2018, the company achieved a total operating income of 2.6 billion yuan, an increase of 11% over the same period last year, and a net profit of 190 million yuan, down 27% from the same period last year. We believe that the core changes are: (1) the rapid development of financial leasing business. Benefiting from the tightening of market funds and the increase in financing interest rates in the first half of the year, the income from financial leasing business increased significantly, contributing 300 million yuan in net profit to the parent company. (2) AMC business has become a new profit driving force, with a new bad management scale of 18.6 billion yuan in the first half of the year, with a market share of 39%, and Guangzhou assets contribute 40 million yuan to long-term investment income. (3) the performance of investment income is poor, and the risk of equity pledge is prominent; in the first half of 2018, the company's fair value change loss and asset impairment were 80 million yuan and 70 million yuan respectively, and the securities business loss was 30 million yuan.

The financial leasing business has developed rapidly, optimizing the structure and controlling risks. In the first half of 2018, benefiting from the tightening of the market financing environment and the improvement of financing in the real economy, Yuexiu Leasing achieved an operating income of 900 million yuan and a net profit of 300 million yuan, an increase of 49% and 55% respectively over the same period last year. In the face of the aggravation of credit risk in the market in the first half of the year, the company adjusted the scale and structure of the project, and the project investment was 8.7 billion yuan, down 10% from the same period last year, of which the first-and second-tier regions accounted for more than 90%, the asset scale reached 31.8 billion yuan, and the credit risk was well controlled. The rate of defective assets is 0.38%.

AMC business has become a new driving force for profit growth. In the first half of 2018, Guangzhou assets realized operating income and net profit of 151 million yuan and 113 million yuan respectively, and contributed 40 million yuan of long-term investment income to the parent company. In the first half of the year, the management of non-performing assets increased by 18.686 billion yuan, with a market share of 39%. Benefiting from the aggravation of credit risk, non-performing assets loans of commercial banks in Guangdong Province have increased. As the second AMC institution in Guangdong Province, Guangzhou has a broad space for asset development. In addition, Yuexiu Group is rich in resources and synergy, which will become a new driving force for the company's profit growth.

Proprietary performance is poor, equity pledge risk is emerging; in the first half of 2018, the company's securities sector operation is subject to two major risks. (1) the risk of equity pledge: the impairment of the company's assets reached 80 million yuan in the first half of the year, a substantial increase. Among them, the operating expenditure of the credit business increased by 467% over the same period last year, mainly due to the impairment loss of equity pledge. By the end of the first half of the year, the company had taken the initiative to reduce the equity pledge balance by 4.9 billion, a decrease of 23% compared with the beginning of the year. (2) the company's proprietary business income in the first half of the year was 183 million, down 12.11% from the same period last year (brokerage industry-19%, CITIC + 16%). The loss of fair value changes and asset impairment in the first half of the year were 80 million yuan respectively, and the lower-than-expected self-operating performance was one of the reasons for the decline in profits.

The share of the brokerage market has increased, and the investment banking business has improved; in the first half of the year, the company's securities business achieved revenue of 800 million yuan, an increase of 5% over the same period last year; net profit loss of 30 million yuan; and market share of brokerage business increased. Brokerage business in the first half of 2018, the company's brokerage business income was 189 million yuan, down 3 per cent from the same period last year (brokerage industry-6 per cent, CITIC + 3 per cent). The market share of income from acting in securities trading (including seat leasing) was 0.45 per cent, with a slight improvement in the ranking. The investment banking business achieved revenue of 100 million yuan, an increase of 40% over the same period last year. In the first half of the year, three refinancing projects were completed and 16 issues of bonds were underwritten. Due to the small volume of investment banking business, it was less affected by tighter investment banking supervision and head effect.

Investment suggestion: buy-An investment rating; the company's EPS is expected to be 0.21 yuan / 0.27 yuan / 0.30 yuan in 2018-2020.

Risk hint: the risk of substantial contraction in trading volume / equity pledge default risk / policy change risk.