Items:
South China Futures released three quarterly reports. In the third quarter, the total revenue calculated by the net method was 350 million yuan (+ 45% compared with the same period last year) and the net profit was 130 million yuan (+ 132% compared with the same period last year).
Total in the first three quarters: the total revenue calculated by the net method is 930 million yuan (year-on-year + 39%) and the net profit is 300 million yuan (year-on-year + 126%).
Comments:
Net interest income from overseas operations continues to rise. The net interest income in the third quarter was 150 million yuan (+ 81% compared with the same period last year), compared with 420 million yuan in the first three quarters (+ 95% compared with the same period last year). The average interest rate of Q3 federal funds is 5.3% (year-on-year + 140%/+3.1pct), compared with 4.92% (year-on-year + 478%/+3.9pct) in the first three quarters. Refer to Q2 company's overseas customer rights and interests of HK $14.09 billion (year-on-year + 33%). The reason why the growth of net interest income is slower than that of the federal interest rate may be that the change of the Fed interest rate reflects the lag and discount of the bank interest rate.
Other businesses are steadily rising. Fee and commission income in the third quarter was 160 million yuan (+ 10% compared with the same period last year) and 440 million yuan in the first three quarters (+ 12% compared with the same period last year). The business maintained steady growth.
The net income of heavy capital business in the third quarter totaled 49 million yuan (year-on-year + 124%), and the first three quarters totaled 67 million yuan (- 11% compared with the same period last year). The significant growth of Q3 contributed to some profits. (heavy capital business net income = investment income + fair value change + net exposure hedging income + other business income-other business costs).
South China fund stock mixed base AUM totaled 780 million yuan (year-on-year + 4.3%), debt base AUM 18.76 billion yuan (year-on-year + 42.7%). The scale of bond funds increased significantly compared with the same period last year.
Investment advice: the company's Q3 performance maintains the expected high growth, and its overseas business continues to lead the futures industry. Apart from net interest income mainly from overseas, other businesses also showed solid growth. We maintain a net profit forecast of $440 million in 2023, EPS forecast of $0.72 and $1.17 for BPS in 2023, and $7.79 and $9.48 for ROE:11.4%/13.1%/12.3% in 2023, 2024 and 2025 respectively. The current target price corresponds to an PE of 18.01, 12.59, and 11.03 times, respectively. Looking forward to the company's full-year performance and overseas business advantages, we maintain the company's 2023 results 23 times PE valuation, corresponding to the target price of 16.50 yuan, maintain the "recommended" rating.
Risk hints: the Fed has entered the interest rate cut cycle beyond expectations, and the expectation of corporate interest rates is uncertain; there is uncertainty about the reduction of transaction fees by exchanges; the risk of regulatory policy changes; and the risk of volatility in futures market trading volume.