China report results:
Guoxin Securities achieved operating income of 8.039 billion yuan in the first half of 2020, an increase of 23.03% over the same period last year, and a net profit of 2.946 billion yuan, an increase of 13.38%. At the end of the reporting period, its net assets were 52.161 billion yuan, down 7.20% from the beginning of the period, and basic earnings per share were 0.34 yuan. It increased by 13.33% over the same period last year, and the weighted average rate of return on net assets was 5.41%, an increase of 0.24 percentage points over the same period last year.
Investment viewpoint:
The brokerage and wealth management business is the industry leader, with revenue from consignment selling financial products exceeding that of last year. The revenue of brokerage business in the first half of the year was + 21.84% compared with the same period last year, which was higher than the growth rate of the industry, in which the market share of net income from agency trading fees (excluding fund split positions) maintained the top three in the industry, and the net income from consignment sales of financial products exceeded that of last year, + 191.35% compared with the same period last year. The company is actively transforming to wealth management, with new high-end business customers accounting for 33.5% of new brokerage business customers in the first half of the year.
Gem investment banking project reserves are rich. In the first half of the year, the investment banking business income was + 21.84% compared with the same period last year, which is lower than the industry growth rate, but at present, the company has a rich reserve of investment banking projects, of which 44 gem sponsor projects are waiting for review, ranking second in the industry. as a state-owned securities firm in Shenzhen and deeply cultivated in Dawan area for many years, the company is expected to take advantage of this gem registration reform opportunity to accelerate the release of investment banking performance.
The debt structure has been optimized and the net interest income has increased. The net interest income in the first half of the year was + 107.84% compared with the same period last year. In the first half of the year, the company redeemed 5 billion yuan of perpetual subordinated debt with a coupon rate of 5.8% issued in 2015, which will save 290 million yuan in interest expenses each year, and significantly increase short-term liabilities with lower costs in the first half of the year. The amount of short-term financing payable increased by 92.4% compared with the beginning of the year. On the revenue side, the company's interest income and stock pledge interest income are + 12.40% and + 11.68% respectively compared with the same period last year.
The proportion of income from self-management and asset management decreased. The income of proprietary business (investment income + fair value change-investment income on joint ventures and joint ventures) in the first half of the year was-5.71% compared with the same period last year, mainly because the proportion of bond assets allocated by companies in the first half of the year was significantly higher than that in previous years. The fair value of corporate bond assets declined; in the first half of the year, the income of the company's asset management business continued to decline compared with the same period last year.
Investment advice: the company recently completed a fixed increase of 15 billion yuan, a substantial increase in capital strength, full impairment provision in the first half of the year, profitability ranked in the forefront of the industry, investment banking performance in the second half of the year is expected to take advantage of the gem registration system reform opportunity to accelerate the release, the current Guoxin Securities PB valuation is below the hub of nearly five years, is expected to continue to improve driven by performance. We forecast that the company's basic earnings per share from 2020 to 2022 will be 0.67 yuan, 0.87 yuan and 1.00 yuan respectively, and the net assets per share will be 7.40,8.12yuan and 8.91yuan respectively. We predict that the weighted average return on net assets will be 10.16% in 2020, covering it for the first time and giving it a "buy" rating.
Risk hint: epidemic risk, substantial impairment of stock pledged assets, and performance below expectations.
