Haitong Securities announced 2018 results. Revenue fell 6.4% year on year to RMB 38.7 billion, and net profit decreased 39.5% year on year to RMB 5.2 billion. The weighted average return on net assets fell 3.14 percentage points year over year to 4.42%. Its subsidiaries achieved revenue of 21 billion yuan, accounting for 52%, and the overseas business achieved revenue of 13.3 billion yuan, accounting for 34%. We believe that the company's valuation will recover on the basis of the gradual release of stock pledge risk. Based on current performance expectations, we raised our 2019 earnings per share forecast from 0.51 yuan to 0.53 yuan (up 17.1% year over year), raised the 2020 earnings forecast per share from 0.65 yuan to 0.72 yuan (up 35.8% year over year), and introduced the 2021 earnings forecast of 0.96 yuan per share. The current closing price is equivalent to 0.76 times 2019 PB, which is 1.33 times lower than the historical average. We raised our target price from HK$9.6 to HK$13.0, which is equivalent to 1.02 times 2019 PB. The target price has room for an increase of 34.0% from the current price, so we upgraded our rating to buy. The performance was in line with expectations. In terms of revenue structure, the company's brokerage, investment banking, asset management, interest, and proprietary business revenue accounted for 17.6%, 18.8%, 11.3%, 28.2%, and 20.6%, respectively. Due to the deteriorating market environment and falling commission rates, the average daily turnover of the A-share market fell 20% year-on-year in 2018 to RMB 368.9 billion. The company's share-based trading market share in 2018 was 4.74%, an increase of 0.06 percentage points over the previous year, and the number of domestic and foreign customers was nearly 14 million. In the A-share market, the company completed 24 equity financing transactions, raising capital of RMB 47.1 billion; completed 415 bond financing projects, with an underwriting amount of RMB 255 billion. The assets actively managed by the company reached RMB 108.3 billion (up 20% year over year). Risk mitigation. By the end of 2018, the total volume of financing operations reached RMB 129.9 billion (down 25.2% year over year). The balance of securities financing decreased 27.7% year over year to RMB 34.7 billion, and the stock pledge balance fell 23.4% year over year to RMB 85.8 billion. Financial assets purchased and resold at the end of the period were RMB 82.7 billion (down 14.4% year over year), mainly due to active reduction in the scale of the stock pledge repurchase business. In 2018, Haitong Hengxin's total assets exceeded 80 billion yuan. Operating revenue increased 32% year over year, and net profit increased 10% year over year. Credit impairment losses are expected to reach RMB 1.6 billion. Upgraded to buy. We believe that the company's valuation will recover on the basis of the gradual release of stock pledge risk. Based on current performance expectations, we raised our 2019 earnings per share forecast from 0.51 yuan to 0.53 yuan (up 17.1% year over year), raised the 2020 earnings forecast per share from 0.65 yuan to 0.72 yuan (up 35.8% year over year), and introduced the 2021 earnings per share forecast of RMB 0.96. The current closing price is equivalent to 0.76 times 2019 PB, which is 1.33 times lower than the historical average. We raised our target price from HK$9.6 to HK$13.0, which is equivalent to 1.02 times 2019 PB. The target price has room for an increase of 34.0% from the current price, so we upgraded our rating to buy.