Key points of investment
Fangzheng Securities released its 2023 interim report. During the reporting period, it achieved revenue and net profit of RMB 40.54 and RMB 1,440 million, respectively, of -0.5% and +1.3% year on year; in the single second quarter, it achieved revenue and net profit of RMB 2,281 million and 884 million yuan respectively, +28.7% and +58.9%, respectively. The weighted average ROE was -0.10 pct to 3.28% year over year; after excluding customer capital, operating leverage was 3.86 times, up 12.2% from the beginning of the year.
The charging business was under pressure for a short time, and the recovery in the capital business boosted performance. On the revenue side, 2023H1 achieved revenue of 21.05 billion yuan and 1,837 billion yuan, respectively, with a year-on-year ratio of -9.9% and +7.7%. In the first half of the year, the total market share turnover was -2.6%, and market trading activity declined. As a result, the company's fee business fluctuated slightly, and self-operated investment revenue increased under the capital market recovery; on the expenditure side, the company's management expenses increased by +2.7% to 2,419 billion yuan. The management expenses rate increased by 1.9 pct to 59.7% year-on-year, and credit impairment losses were reversed 0.02 billion yuan. Steady.
As a result of weak market trading, the company's proxy purchasing revenue declined, and the performance of newly opened accounts was impressive. In terms of fee-charging business, net revenue from brokerage, investment banking, and asset management was 1,706 million, 1.28 million yuan, and 92 million yuan, respectively, -4.9%, -43.1%, and -32.0%, respectively. The decline in the company's brokerage business revenue was due to the decline in market transaction activity. Net revenue from the brokerage business was -7.7% year-on-year to 1,127 billion yuan, but the company's brokerage moat was stable, with proxy purchases +4.0% to 31,977 billion yuan compared to the beginning of the year, and +3.83% year-on-year ratio of newly opened accounts in the first half of the year to 980,000 accounts; the company's equity and bond financing scale in the first half of the year was +153.4% and -60.9% respectively to 3.342, 8.544 billion yuan. A total of 1 Beijing Stock Exchange IPO and 1 main board extension project have been completed. As of August 24, 2023, 6. Single equity financing projects are in the queue; in the first half of the year, the company's pooled, single/special asset management scale was +88.2%/-20.3%/-44.0%, respectively, to 370.4/365.9/30.02 billion yuan. The public offering management scale of its subsidiary Fangzheng Fubang Fund was +15% compared to the beginning of the year, and the scale of the company's pooled asset management and public offering management gradually expanded.
Liangrong's market share continues to rise, and the company's expansion trend continues. In terms of capital business, net interest income and investment business income were $801 and $1,035 million, respectively, -5.6% and +21.0% year-on-year, respectively. The company's share of the financial market increased by 0.1 pct to 1.8% from the beginning of the year. The slight year-on-year decline in net interest income was +16.3% year-on-year due to the increase in the scale of proprietary investment and leverage. Of these, interest expenses payable on bonds were +86.2% to 243 million yuan over the same period. Under the recovery and expansion of the capital market, the company's investment business revenue increased markedly. By the end of June 2023, the company's financial assets were +16.7% from the beginning of the year to 94.059 billion yuan. Of these, bond assets were +18.1% from the beginning of the year to 74.171 billion yuan, accounting for 79% of the financial assets.
The company's development is on the right track, and the brokerage business has outstanding advantages. In the context of increasing capital market activity, brokerage business revenue is expected to increase, and performance will accelerate. We adjusted our profit forecast. We expect the company's net profit to be 2,329 million yuan and 2,644 million yuan from 2023-2024, compared to +8.4% and +13.5% year-on-year. The closing price on August 24, 2023 corresponds to 1.32 and 1.25 times PB, respectively, maintaining the “increase in weight” rating.
Risk warning: the risk of large fluctuations in the capital market, the risk of macroeconomic downturn, the risk that the market share increase falls short of expectations, and the risk that the promotion of new business falls short of expectations.