Incidents:
On August 30, CITIC Construction Investment Securities released its 2023 interim financial report. The company achieved revenue of 13.46 billion yuan in the first half of the year, -6.6% year-on-year; net profit of 4.31 billion yuan, -1.7% year-on-year; a weighted average ROE of 5.41% for the half-year, down 0.58 pct from the same period last year; and basic earnings per share of 0.49 yuan/share.
Comment:
23H1 achieved revenue of 13.46 billion yuan, -6.6% year-on-year; Q2's quarterly revenue was 6.76 billion yuan, -16.4% year-on-year, +1% year-on-year. Net profit for Q2 was 4.31 billion yuan, -1.7% year-on-year; Q2 quarterly net profit was 1.87 billion yuan, -33.8% YoY, -22.9% YoY. The revenue structure is relatively stable compared to the same period last year. Self-operated/brokering/investment banking/asset management/credit/other businesses accounted for 31.8%/22.4%/19.5%/5.4%/8.0%/12.9% of the main business, respectively +11.5/+1.7/+0.2/+0.9/+1.3/-15.6pct.
The core advantages of the brokerage business are maintained, and wealth management space is expected to open up. 23H1's wealth management business segment achieved revenue of $3.02 billion, a slight increase of 0.99% over the previous year. Among them, the net revenue of the securities brokerage business was 2.37 billion dollars, -11.6% year-on-year, accounting for 3.99% of the market share, ranking 7th in the industry. Revenue was under pressure due to the decline in market trading sentiment. Looking at various business segments, the market shares of 23H1 agent net income from securities trading, net income from consignment financial products, and market value of managed securities were 3.7%, 6.3%, and 5.6%, respectively, and -0.1 pct, +0.2 pct, and -3.8 pct. In terms of the two finance business, 23H1's two finance business balance reached 60.83 billion yuan, +2.5% year on year, market share 3.8%, up 0.1 pct year on year.
The investment banking business leads the brokerage industry and has fully benefited from the comprehensive registration system reform. 23H1's investment banking business revenue was 2.62 billion yuan, -5.5% year on year and -14.3% month on month. 23H1 completed equity financing with an underwriting amount of 67.49 billion yuan, maintaining the 2nd place in the industry; of these, the IPO principal underwriting amount of RMB 29.28 billion ranked 2nd. The company has sufficient project reserves, and is in the highest number of IPOs (73) and refinancing (27) projects under review in the industry. The scale of corporate debt financing in the first half of the year was 726.4 billion dollars, +0.06% compared to the same period last year. The company's investment banking business continues to lead the industry and is expected to continue to benefit from favorable policies.
The contribution of self-operated business is high, and the transformation of active asset management management continues. 23H1's trading and institutional customer service achieved revenue of 5.07 billion dollars, +22% over the same period last year. 23H1's self-operated business revenue was 4.29 billion yuan, +45.9% year-on-year; Q2 quarterly self-operated business revenue was 1.78 billion yuan, -23.0% year-on-year, -29.2%. 23H1's asset management business achieved revenue of 720 million yuan, and the company's entrusted asset management scale was 452.4 billion yuan, -5.2% compared to the end of the previous year. The transformation of the company's business to active management continues to advance. Active management products account for 69.4% of the total scale of asset management, a slight decrease of 3.3 pct from the end of 2022, and the active management transformation of asset management business continues to advance.
Profit prediction and rating: With the introduction of a package of favorable policies for the active capital market, it is conducive to promoting the overall stability of the A-share market. At the same time, as a leading listed brokerage firm, the trend of diversification of revenue will become more obvious in the future as leverage management relaxes and innovative business development. We adjusted 23-25 to 89.2 (original 136.76) /116.3 (original 150.44) /139.2 (increase) billion yuan and EPS 1.15/1.50/1.79 billion, respectively. The corresponding PE (A) valuation was 22.5/17.3/14.4 times, and PE (H) valuation was 6.7/5.2/4.3 times, respectively.
Given that the current valuation of the brokerage sector is still at a historically low level, influenced by a combination of favorable policy factors, it is expected to usher in a “double rise” in valuation and performance. Maintain the “neutral” rating for A shares and maintain the “increase in holdings” rating for H shares.
Risk warning: The downward pressure on the economy is increasing; active capital market reforms fall short of expectations.