Event: Zhongyuan Securities released its annual report in 2018, with operating income of 1.65 billion yuan, down 23.19% from the same period last year, and net profit of 66 million yuan, down 85.12% from the same period last year. At the end of the year, the company's total assets were 42.155 billion yuan, an increase of 3.67% over the same period last year, of which overseas assets were 3.058 billion yuan, accounting for 7.25% of the total assets. The net asset was 9.951 billion yuan, down 2.15% from the same period last year. The leverage ratio (minus customer margin) is 6.67. ROE0.66%, fell 3.58 percent from the same period last year. A cash dividend of 0.10 yuan (including tax) will be distributed for every 10 shares in the first half of 2018, and there will be no profit distribution in the second half of the year.
Brokers plus Liangrong contribute about 61% of revenue and 6% overseas. The revenue of brokerage business is 735 million yuan, accounting for 45%; the net interest income of Liangxiong is 260 million yuan, accounting for 16%; the revenue of asset management is 224 million yuan, accounting for 14%; the revenue of investment bank is 85 million yuan, accounting for 5%; the revenue of self-operation is 84 million yuan, accounting for 5%; and the revenue of overseas business is 96 million yuan, accounting for 6%.
A number of business lines were reformed in an orderly manner, and investment banking took the lead in completing all-round reform. The market share of the company's stock-based transactions in 2018 was 0.52%, down slightly from 0.529% in 2017. The company reconstructs the internal control structure of the investment bank, optimizes the salary system to attract talents, and has formed three regional investment bank headquarters in Beijing, Shanghai and Zhengzhou, with 50 people in Baodai.
The proprietary investment process was reconstructed and revenue grew by more than twice as much. In 2018, the company's revenue from its own business was 84 million yuan, an increase of 217.64% over the same period last year. Fixed income investment better seize the opportunity of last year's bond bull market and achieve better returns; the rate of return on equity investment also significantly exceeds the market.
Investment suggestion: the company is the only legal person securities firm registered in Henan, which has the characteristics of small loan, life insurance and futures business. Dual listing broadens the channels of replenishing funds and creates overseas influence.
It is expected that the company will be worth EPS0.03/0.04/0.05 yuan per share in 19-20-21, with a current valuation of PB2.47x.
Risk hints: a-share investment activity decreased; market volatility risk; capital market reform did not meet expectations; Science and Technology Innovation Board listed companies did not meet expectations.
