Event
When the company released its 2021 results, total income and net investment income decreased by 8% compared with the same period last year, net profit increased by 56%, and return on net assets increased by 26%.
In 2021, the company's total income and net investment income decreased by 8% to 2.504 billion yuan compared with the same period last year, of which fee income was + 10% to 1.744 billion yuan, and net investment income was-33% to 760 million yuan. Net profit is + 56% to 1.6 billion yuan compared with the same period last year, and ROE is + 7% to 26% compared with the same period last year. The increase in net profit and ROE is mainly affected by the appreciation of share options. Excluding the appreciation of share options, the company's net profit and ROE in 2021 are 780 million yuan and 12%, respectively, a decrease of 7 percentage points. From a departmental point of view, the company's performance is mainly dragged down by the investment management division, whose revenue is-34% to 910 million yuan compared with the same period last year, partly offset by the growth in the performance of the investment bank and Huaxing securities division. The revenue of the two departments is + 10%, 61% to 1.1 billion yuan / 410 million yuan, respectively.
Brief comment
The investment bank has strong distribution ability and ranks high in IPO, a Chinese securities firm in Hong Kong. In 2021, the total income and net investment income of the company's investment banking division increased by 10% to 1.1 billion yuan compared with the same period last year, accounting for an increase of 7 percentage points to 44% compared with the same period last year.
Investment banking business income mainly comes from: 1) the increase in initial public offering led to stock underwriting income from + 35% to 349 million yuan compared with the same period last year, and the company's market share and ranking continued to improve. The company completed six Hong Kong stock IPO projects in the whole year, participated in fund-raising of more than HK $115 billion, ranked third among Chinese investment banks, and completed 10 US stock IPO projects in the whole year, ranking first in Chinese investment banks. 2) sales, trading and brokerage fee income is + 47% to 193 million yuan compared with the same period last year, and the company's brokerage business continues to grow rapidly, ranking among the top 16 in the Hong Kong market and the top three among Chinese securities firms; 3) partly dragged down by the decline in consulting service income, this income decreased by 10% to 538 million yuan compared with the same period last year.
Looking forward to 2022, with the further linkage of the company's investment banking primary and secondary markets, taking into account the company's advance layout and sufficient project reserves in the new consumption, health and technology and cash manufacturing industries, as well as the leading position of the company's private financing financial advisory business in the medical and corporate service track, the investment banking division is expected to continue to strengthen the company's performance.
The group increased its stake in Huaxing Securities by 15%, and the performance of the securities division reached a record high. In 2021, the total income and net investment income of the securities segment of the company increased by 61% to 410 million yuan compared with the same period last year, accounting for 7% of the total income and net investment income ratio to 16%. Among them, transaction and consulting fees, interest income and net investment income were + 107%, + 4%, + 56% to 119 million yuan, 32 million yuan and 259 million yuan, respectively. The performance growth of Huaxing Securities Division is mainly due to: 1) the large investment bank project has entered the harvest period: the appreciation of the investment value of Science and Technology Innovation Board's two listed equity, Science and Technology Innovation Board's initial public offering and gem financing transactions have increased the stock underwriting income; 2) the AUM of big asset management has doubled, and the asset management scale of Huaxing Securities has exceeded 2 billion yuan in 2021, a three-fold increase compared with 2020. 3) the rate of return on proprietary investment has increased, and Huaxing Securities has continuously honed its core investment ability after obtaining its own business license. Science and Technology Innovation Board (Xinmai Medical, and Lin Weina) has made rich profits, and the first batch of Science and Technology Innovation Board has steadily withdrawn, and the net investment income in 2021 has increased by 56% compared with the same period last year. Looking forward to 2022, with the further layout of Huaxing Securities retail wealth management platform in Z era, and the gradual emergence of synergy within the group, wealth management is expected to become a new growth point of Huaxing Securities Division.
Market fluctuations lead to a decline in investment income, and the excess return of concentrated exit is expected. In 2021, the total income and net investment income of the company's investment management division decreased by 34% to 910 million yuan compared with the same period last year, accounting for 14% to 36% of the company's revenue ratio. By 2021, the company's investment management AUM decreased by 15% to 48.85 billion yuan compared with the same period last year, and the AUM that generated management fees ranged from + 9% to 23.8 billion yuan.
The performance of the investment management segment is mainly due to: 1) the decrease in net investment income is a drag on the segment revenue level. The net investment income of the investment management business is mainly the investment income of self-managed private equity funds and third-party private equity funds. Affected by the market fluctuations in the second half of 2021, the company's investment management division has a net investment income of-49 to 474 million yuan compared with the same period last year. 2) the AUM of investment management decreased, from-15% to 48.9 billion yuan in 2021 compared with the same period last year, mainly due to the reduction of AUM caused by fund allocation and market fluctuations in the first half of 2021, which reduced the AUM of investment management by 8.2 billion yuan and 5.6 billion yuan respectively, partly offset by fund raising in the second half of 2021, which increased the AUM of investment management by 5.2 billion yuan. 3) the increase in carried interest income has been realized, and by the end of 2021, the total return of a main fund and a special fund has successfully exceeded the level of return agreed upon in the agreement regulating the fund. The company recognized the performance fee as carried interest income, and the company's investment management division achieved carried interest income of + 35% to 29 million yuan in 2021 compared with the same period last year.
Looking forward to 2022, the company's investment management business will gradually enter the withdrawal period. by 2021, more than half of the cumulative carry of the company's asset management business will come from funds in the late stage of withdrawal (51% of funds raised in the period 2013-2015). With the gradual withdrawal of funds raised in 2013-2015, excess income is just around the corner.
The existence of AUM has greatly increased to create a wealth management platform with the characteristics of alternative assets. China Renaissance Holdings Ltd. 's wealth management business provides value-added wealth management services to high net worth individuals and other high net worth groups represented by new economy entrepreneurs. Wealth management products take alternative assets and new economic assets as the core, covering cash management, fixed income, equity investment, alternative investment and so on. By 2021, the AUM of Huaxing Capital Wealth Management reached 9.4 billion yuan, with a compound growth rate of 169% since 2019. The per capita assets under management at the front desk were 830 million yuan, an increase of 2.6 times over the same period last year. By the end of 2021, the company's wealth management business has a total of 313 customers, a stock of 185customers, per capita persistent assets of about 40.87 million yuan. In terms of financial data, the company's other business income and net investment income decreased by 16% to 83 million yuan compared with the same period last year, mainly due to the decrease in investment income from cash management products, partly offset by the increase in wealth management business income.
Profit forecast and valuation: the total revenue of the forecast company from 2022 to 2023 is 2.67 billion yuan / 3.32 billion yuan respectively, which is-12.7% and 24.3% respectively compared with the same period last year, and the net profit is 940 million yuan / 1.28 billion yuan respectively. The year-on-year growth rate was 20.5% and 36.2% respectively.
The current share price is trading at just 0.6 times PB in 2021, maintaining a "buy" rating.
Risk hints: 1) policy risk; 2) Fund performance is not as expected.