Performance review
Yongan Futures' 1H23 performance was slightly lower than our expectations
The company's 1H23 revenue was -39% year-on-year, net profit was +30% to 40,000,000 yuan, annualized weighted average ROE +1.4ppt to 6.8%; 2Q23 revenue was -44% /23% YoY to 6.8%; 2Q23 revenue was -44%/+23% month-on-month to 6.6 billion yuan, and net profit was -28% /2% month-on-month to 200 million yuan. Performance was slightly lower than our expectations, mainly due to risk management business revenue falling slightly below expectations. The company's 1H23 management fee rate after adjustment was 44%, +8ppt year on year.
Development trends
The average daily scale of customer equity increased steadily, while wealth and asset management businesses declined year-on-year. 1) 1H23 futures business transaction fee revenue and net interest revenue totaled +3.5% to $6.3 billion; the corresponding company agent's domestic futures turnover was -2% to 7.7 trillion yuan; market share was -0.1ppt to 1.5%; the average daily customer equity scale was +8% to 48.7 billion yuan, and the conversion rate was +0.1ppt to 2.7% year-on-year. 2) 1H23 fund sales revenue was -58% year-on-year to 0.3 billion yuan, mainly due to capital market fluctuations, and the net value of some of the company's asset management products declined; the company actively introduced different styles of products to cope with market fluctuations, and introduced a total of 55 private equity and public equity products in the first half of the year. 3) 1H23 asset management business revenue was -65% to 6.13 million yuan, and the asset management scale at the end of the period was +80% to 3.2 billion yuan, or asset management revenue declined due to a decrease in the share of investment income.
Risk management revenue has declined, and proprietary investment has picked up year on year. 1) 1H23 risk management business revenue was -41% year-on-year to 11.1 billion yuan, operating profit -23% to 160 million yuan, accounting for -22ppt to 31%.
Among them, in terms of margin trading, the company successfully registered the first batch of standard warehouse receipts for industrial silicon futures; gave full play to the function of a trader's factory warehouse, had 13 types of traders' factory warehouse qualifications, and upgraded “futures+warehousing logistics”
Model service capability. In terms of market making, the company added 3 futures and 2 options to market in the first half of the year. The product coverage continued to expand, and the scale of the business continued to expand. 2) In addition, 1H23's parent company had investment business revenue of 100 million yuan (vs. 1h22 loss of 200 million yuan), and the company's financial assets at the end of the period increased 32% from the beginning of the year to 118 billion yuan. The company invests in equity around the upstream and downstream of the industrial chain to achieve integration of industry and finance.
On August 18, the company signed a cooperation agreement with Innovative New Materials, which is engaged in R&D and manufacturing of aluminum alloy materials and products, and subscribed for 22.17 million additional shares of Innovative New Materials, worth 100 million yuan.
Overseas business has performed well, and the number of institutional accounts opened has increased dramatically. 1H23's overseas business revenue was +68% year-on-year to 180 million yuan, and operating profit was +521% to 63.76 million yuan, accounting for +10ppt to 13%. The company is actively expanding target customers such as QDII funds, brokerage firms, and hedge funds, and promoting new business layouts such as OTC derivatives. The number of 1H23 institutional accounts opened increased 1.5 times over the same period last year.
Profit forecasting and valuation
Considering the slowdown in the industry's risk management business growth since this year, we lowered our 2023/24 profit forecast by 17%/16% to 10/1.2 billion yuan. The current stock price corresponds to 2023/24e P/E 25/21x and P/B2.0/1.9x.
Considering the systematic increase in sector valuations catalyzed by a package of active capital market policies, we maintained an outperforming industry rating and target price of 21.8 yuan, corresponding to 2023/24e P/E 32/26x and P/B 2.5/2.4x, which is 27% upward from the current stock price.
risks
Futures market turnover has declined sharply, regulatory policies are uncertain, and capital markets have fluctuated greatly.