Event: the company recently released its report for the third quarter of 2017, with operating income of 1.73 billion yuan, an increase of 1.74% over the same period last year, a net profit of 322 million yuan, an increase of 20.08% compared with the same period last year, and a weighted average ROE of 2.35%.

Comments:

The contribution of Jianghai Securities to the company gradually increased its share of net assets. Jianghai Securities increased from 71.7% at the end of June to 74.3% at the end of September; the proportion of net profit increased from 60.5% in the first half to 73.3%; and the proportion of operating income. Jianghai Securities rose to 47.2% from 42.3% in the first half.

Jianghai Securities is becoming more and more important to listed companies, and then the company will strengthen its support and investment to Jianghai Securities.

Jianghai Securities is developing well, increasing its net assets by 1.98 per cent in a single quarter. According to the monthly operating data disclosed by Jianghai Securities, its net assets increased from 10.1 billion yuan at the end of June to 10.3 billion yuan at the end of September, an increase of 1.98 per cent in a single quarter. Specifically, the scale of stock pledge business has a more obvious growth. We estimate that the company's stock pledge business increased by about 1.6 billion yuan in the third quarter, an increase of 29% over the middle of the year.

Debt financing is active, leverage increases rapidly Jianghai Securities issued 7.4 billion yuan of new bonds in 2017, and since the second half of the year alone, the size of new bonds has reached 5.2 billion yuan, including 4.4 billion yuan for subordinated bonds and 3 billion yuan for corporate bonds, with an issue cost of 5.3 percent. 5.7%. According to our estimates, the effective leverage ratio of Jianghai Securities has increased from 1.67 times at the end of 2016 to about 3.2 times at present. The increase of leverage ratio will help to improve the future ROE level of Jianghai Securities.

Investment suggestion: we predict that the annual EPS of the company in 2017-18-19 will be 0.25,0.44,0.61 yuan. According to the distribution valuation method, we give the company a valuation of 25.3 billion yuan, corresponding to the target price of 12.01 yuan per share. Maintain a "buy" rating.

Risk hint: the securities industry is depressed; the company's management is not as expected.