What happened: Guoxin Securities released a report for the third quarter of 2022 that the company's revenue in the first three quarters of 2022 was 13.3 billion yuan, down 21.72 percent from the same period last year; its net profit was 4.762 billion yuan, down 38.95 percent from the same period last year; and the weighted average return on net assets was 5.18 percent, down 4.8 percentage points from the same period last year.

The income from brokerage business and investment business makes a great contribution. In the first three quarters of 2022, the proportion of company brokerage and wealth management / investment banking / interest net income / investment / other income was 30.8% 10.5% and 10.6% respectively, 31.4% and 15.0%, respectively. The combined proportion of brokerage and wealth management business and investment business was about 62.2%, and the performance was highly related to the secondary market. In terms of business contribution, brokerage and wealth management / investment banking / investment / asset management / other operating income increased by-26.1%, 0.2%, 41.8%, 26.4%, 104%, respectively, compared with the same period last year. The decline was mainly due to a significant decline in investment business.

The growth of brokerage business is driven by customer group, and the scale of capital intermediary business is reduced. Revenue from brokerage and wealth management reached 3.971 billion yuan in the first three quarters of 2022, down 26.1% from the same period last year, accounting for 30.8% of total revenue. The number of the company's customers is growing steadily. The company's interest income in the first three quarters was 1.369 billion yuan, down 17.77% from the same period last year. Of this total, 52.21 billion yuan was raised at the end of the third quarter, down 15.75% from the beginning of the year. 10.005 billion yuan of financial assets were bought and sold, an increase of 47.76% over the end of last year. The scale of the financial and equity pledge business declined mainly due to the market environment.

Seize the opportunity of registration system, investment banking business market position is stable. In the first three quarters of 2022, the company's investment banking business achieved a net income of 1.32 billion yuan, up 0.23% from the same period last year, maintaining a small growth trend. As a state-owned securities firm in Shenzhen, the business is accurately located in Guangdong, Hong Kong and Macao, where small and medium-sized enterprises are dense. It is speculated that the company's advantage in the gem in the first three quarters is further highlighted, and its profitability is expected to be further enhanced.

The net income on investment fell 41.8% compared with the same period last year, and the asset management business was transformed to active management. In the first three quarters of 2022, the company achieved a net investment income of 4.053 billion yuan, accounting for 31.4% of the total revenue, which is an important source of income for the company. The company's net investment income fell 41.78% compared with the same period last year, mainly due to the change in fair value profit and loss from positive to negative, and the fluctuation in the securities market led to a decrease in the fair value of financial instruments. The contribution income of the company's asset management business in the first three quarters was 230 million yuan, up 26.35% from the same period last year, mainly due to the decline in the net value of the asset management business.

Maintain the "overweight" rating. As a local securities firm in Guangdong, Hong Kong and Macao, the company has diversified sources of income and sound performance, and is expected to continue to share policy dividends with the deepening reform of the capital market. In view of the fact that the company's proprietary income fluctuates more than we expected, we downgrade the original profit forecast and expect the net profit for 22-23 years to be 6.626 billion yuan (33.71% lower than the original forecast) and 8.411 billion yuan (24.41% lower than the original forecast), respectively, and an additional 24-year forecast of 10.356 billion yuan to maintain the "overweight" rating.

Risk hint: proprietary income is affected by fluctuations in the secondary market, and the decline in market trading sentiment leads to a decline in trading volume.