Event: Hongta Securities achieved revenue of 2,066 million yuan in 2019, an increase of 71.94% over the previous year; it achieved net profit of 838 million yuan, an increase of 116.72% over the previous year. Corresponding to EPS of 0.24 yuan/share, an increase of 100.00% over the previous year; the weighted average return on net assets was 6.78%, an increase of 3.30 percentage points over the previous year.
Key points of investment:
Revenue from the securities investment business increased dramatically and became the main source of revenue. Affected by the overall recovery in the capital market, the company's securities investment business achieved a profit of 1,437 billion yuan during the reporting period, an increase of 206.00% over the previous year. The share of revenue and profit increased by 21.66 and 19.38 percentage points, respectively, to 59.87% and 75.81%.
The scale of the credit trading business has been rising steadily, and revenue has remained stable. At the end of the reporting period, the company's total credit trading business was 7.503 billion yuan, an increase of 23.30% over the previous year. Among them, the financing and securities lending scale was 1,152 billion yuan, and the stock pledge scale was 6.351 billion yuan. Stock quality risk was manageable. Revenue and profit accounted for 17.08% and 20.65% respectively.
With the integrated development of online and offline, the profits of the securities brokerage business have increased. The company is committed to online and offline linkage to build a unified business and service platform. During the reporting period, the company's securities brokerage business achieved a profit of 20.886 million yuan, an increase of 671.20% over the previous year.
Market competition has intensified, and investment banking business has seriously declined. The scale of equity financing in the market declined year-on-year, the second-tier market of the New Third Board continued to be sluggish, and earnings from changes in the fair value of the market-making business were negative, which had a huge negative impact on investment banking business. During the reporting period, the company's investment banking business achieved a profit of -24.1461 million yuan, a year-on-year decrease of 492.56%.
The asset management structure has been continuously optimized, and private equity fund income has grown rapidly. The company vigorously expanded its fixed income business and achieved a breakthrough in the special asset management business. The company's asset management business achieved a profit of 7.679,600 yuan in 2019, an increase of 303.33% over the previous year. In terms of private equity fund business, the company's subsidiary Red Securities Reed has invested in a total of 12 projects. Of these, 3 projects have been successfully withdrawn, and some projects have received back-end financing.
Investment advice: The company invests in its securities investment business on a large scale, benefits from fixed income equity, high revenue share, and high performance flexibility. We are optimistic about the company's investment capacity. We expect earnings per share in 2020-2022 to be 0.25, 0.29, and 0.31 yuan, respectively. For the first time, an “increase in holdings” investment rating was given.
Risk warning: COVID-19 has led to the risk of market fluctuations; market competition is intensifying.