Core ideas:
South China Futures released Q3 quarterly data in 2023, Q3 operating income in 2023 was 1.7 billion yuan, down 5.3% from the same period last year. 2023Q1-3 revenue was 4.85 billion yuan, down 6.9% from the same period last year.
The net profit of 2023Q3 was 130 million yuan, an increase of 129.6% over the same period last year. The net profit of 2023Q1-3 was 300 million yuan, an increase of 126.2% over the same period last year. (1) the company's revenue is greatly affected by the basis trade, and the slight decline in 2023Q1-3 revenue from the same period last year is to some extent affected by the contraction in the basis trade volume, that is, the other business income of 2023Q1-3 is 3.92 billion yuan, down 12.7% from the same period last year. (2) benefiting from the leading layout of overseas futures brokerage business, the growth of interest income from overseas margin deposits supports the growth of net profit faster than that of the industry under the background of the Fed raising interest rates. As of 2023Q3, the margin payable was 29.87 billion yuan, an increase of 10% over 27.26 billion yuan at the end of last year. 2022 related indicators also increased by 11%.
The Fed's high interest rate policy boosts profits. According to Guangfa Macro Research, the September interest rate minutes and the statement of the meeting sent a similar message that the Fed is nearing the end of raising interest rates, but the focus of Fed officials has shifted from the magnitude of the rate hike to the possible duration of high interest rates, that is, high forlonger. The relatively high overseas interest rates and the increase in the size of the company's overseas equity have contributed to a high profit. 2023Q1-3, the company's annualized ROE is 11.4%, an increase of 4pcts over 2022.
There are barriers to the growth of overseas rights and interests. (1) Henghua International, a wholly-owned company, has a global core market license, while its major domestic counterparts are licensed only in Hong Kong, China or Singapore. (2) as of 23H1, the amount of foreign equity is 14.1 billion Hong Kong dollars, and the proportion of foreign assets in yoy+33.24%, has increased from 16% in 20 years to 29% in 22 years. (3) the scale of overseas rights and interests is large. The penetration rate of overseas equity scale of the company is higher than that of other Chinese futures companies, the increase in hedging demand of Chinese industry is expected to lead to the growth of overseas business scale, and the accelerated development of financial futures will also continue to promote the expansion of equity scale.
Profit forecast and investment advice. Affected by the reduction of the basis trade, the revenue forecast is lowered, with an estimated 23-year revenue of 6.6 billion yuan and a net profit of 420 million yuan. In the past five years, the PE is basically 24x and above, with an average of 29x since 22 years. Based on the 23-year EPS 0.69 yuan, the PE is valued at 25x, corresponding to the 23-year reasonable value of 17.1 yuan per share, giving the company an "overweight" rating.
Risk hint. The economic downturn has pulled down fees, regulatory crackdowns, and lower-than-expected interest income.