Incident: According to the company report, in 2019H achieved operating income of 10.5 billion yuan (YoY +73%), net profit of 3.2 billion yuan (YoY +55%), and an unannualized weighted average ROE of 4.2% (YoY +0.74pcTS). We believe that the company's investment highlights include: (1) Capital supplementation boosts the rapid development of investment and market-making business. The company's net capital rose to 60.6 billion yuan after many rounds of financing. The company achieved significant performance growth in self-employment, futures and options business, etc., and capital investment accelerated development; (2) the credit trading business was restructured to clear risks, and there was room for improvement in leverage ratio. In the first half of the year, the company reduced the scale and optimized the structure of the equity pledge business. The leverage ratio was reduced from 4.1 times to 3.7 times. As capital replenishment was completed and risk adjustments were put in place, the company was able to increase leverage in developing asset-heavy business with comparative advantages. Capital supplements promote the rapid development of investment and market-making business, and the credit trading business clears risks. Since 2018, the company has successively completed the issuance of A-shares and the listing of H-shares, raising 12 billion yuan and 9 billion yuan respectively. The significant increase in capital strength has boosted the rapid development of the company's investment and market-making business. (1) Self-operated business drives growth, and the derivatives market is developing rapidly. 2019H's self-operating income was 2.86 billion yuan (YoY +37%), and the share of equity market-making asset allocation increased. Self-operated equity securities and their derivatives/net capital rose to 25.6% from 20.3% at the beginning of the year, mainly due to a sharp increase in market-making assets (Association data showed that Shenwan Hongyuan added 72 billion yuan in options principal in the first half of the year, ranking third in the industry). (2) Diversified capital investment patterns to create “investment+investment banking” characteristics. The subsidiary Hongyuan Huizhi actively promotes businesses such as mezzanine investment, urban renewal projects, debt-for-equity projects, medical industry fund projects, and provincial new and used kinetic energy conversion fund projects; Shenwan Innovation Investment focuses on promoting equity investment and the investment layout of science and technology innovation boards, financial product investment, and real estate funds. We believe that the future linkage between investment and investment banks is one of the development trends of integrated brokerage firms. The company has financial advantages and mature business experience in this regard. (3) The credit transaction business clears risks. As of the end of June 2019, the final balance of the company's financial services was 48.3 billion yuan, and the market share fell to 5.3% (2018A: 5.65%); the stock pledged repurchase asset balance was $32.3 billion, down 26% from the beginning of the year; and cumulative credit impairment losses were calculated at $270 million, of which $190 million was spent on purchases and resales, and $110 million was accrued in financing, and impairment of accounts receivable recovered $0.9 billion. The asset-light business has been steadily transforming and developing. (1) Brokerage business promotes transformation. The net revenue of the 2019H brokerage business was 2.1 billion yuan (YoY +12%, industry +22%). The company further strengthened wealth management transformation and network optimization layout, improved the quality of comprehensive financial services for institutional customers, and the market share of seat leasing business was 4.4%. At the same time, the company obtained securities investment fund custody qualification in July. (2) Bond-type investment banks seize opportunities. The net revenue of the 2019H investment banking business was 540 million yuan (YoY +33%, industry +22%). The performance growth mainly came from the bond investment business. The underwriting scale of corporate bonds and corporate creditors was 5.7 billion yuan and 18.7 billion yuan respectively, up %/% from the previous year. (3) Asset management revenue is affected by policies, leading the active scale of the industry. Affected by the new asset management regulations, the net revenue of the 2019H asset management business was 550 million yuan (YoY -24%, industry -8%). At the end of June, the company's asset management business was 604.3 billion yuan, down 10% from the beginning of the year. The average monthly scale of active management was 143 billion yuan, ranking 6th in the industry. Fuguo Fund, a shareholding subsidiary, managed assets of 519.7 billion yuan, an increase of 20% over the beginning of the year. Some index funds holding Shenwan Lingxin led the ranking. Investment advice: Buy-A investment rating. We expect the company's EPS for 2019-2021 to be 0.23 yuan, 0.25 yuan, and 0.28 yuan, with a six-month target price of 6 yuan, corresponding valuation of 1.6 xPb. Risk Warning: Proprietary Investment Risks/Business Risk/