Yongan Futures 1-3Q23 performance slightly lower than we expected
The revenue of 1- 3Q23 of the Company ranged from-34% year-on-year to RMB 18.8 billion yuan, the net profit attributable to the parent company ranged from +18% year-on-year to RMB 560 million yuan, and the annualized weighted average ROE ranged from +0.7ppt to 6.1% year-on-year; 3Q23 revenue ranged from-25% year-on-year/month-on-month +3% to RMB 6.8 billion yuan, and the net profit attributable to the parent company ranged from-6% year-on-year/month-on-month to RMB 150 million yuan. The performance was slightly lower than our expectation, mainly due to the lower-than-expected income of risk management business. 1- 3Q23 The company's management fee was-1% year-on-year, corresponding to the adjusted management fee ratio of +10ppt to 44% year-on-year; the leverage ratio of the company at the end of the period (excluding customer equity) was +0.2x to 2.0x compared with the beginning of the year.
Trend of development
Fee income outperformed peers, with overseas interest rate hikes driving net interest income growth. 1) 1-3Q23 Net fee income from year-on-year-7% to 580 million yuan (Q3 year-on-year +14%/month-on-month +20%). In comparison, the handling fee income of futures industry (parent company caliber) from January to August was-11% year-on-year, and the overall performance of the company was better than that of the same industry; the net interest income of 1- 3Q23 was +13% year-on-year to 490 million yuan (Q3 year-on-year +4%/month-on-month +7%), and the total handling fee and interest net income was +1% year-on-year to 1.1 billion yuan. At the end of the period, the scale of customer equity of the Company ranged from-10% to 41.3 billion yuan compared with that at the beginning of the year, and the corresponding conversion rate ranged from +0.2ppt to 3.3% year-on-year. Overseas interest rates have continued to grow since 2023. Hibor interest rates (monthly average) in the first three quarters increased from +2.9ppt/+2.5ppt to 4.7%/4.9% compared with the same period last year, driving the conversion rate of the company upward.
The risk management business was under pressure and innovative business models were introduced to enhance service capabilities. 1- 3Q23 Company's net income from other businesses dominated by basis trading business increased from-69% year-on-year to 190 million yuan (Q3 year-on-year-81%/month-on-month-27%), including investment income from futures market hedging and self-owned capital investment (excluding investment income from associates and joint ventures) from-42% year-on-year to 180 million yuan (Q3 loss of 14.93 million yuan). Affected by the decline in the transaction scale of the spot market, the narrowing of the basis profit and the loss of some personnel, the Company's risk management business as a whole declined. In addition, the main stock indexes of the capital market have fallen, 1-3Q Shanghai and Shenzhen 300, GEM index-4.7% and-14.6% respectively. We expect the company's own capital investment to be under pressure. Under the circumstances that the overall development of the risk management industry slows down, the Company expands its business scale through business model innovation, such as successfully registering the first batch of standard warehouse receipts for industrial silicon futures, currently having 13 varieties of trader warehouse qualifications, and improving the service capability of "futures + warehousing logistics" mode.
Profit forecast and valuation
Taking into account the overall slowdown in the industry risk management business, we lowered our 2023/24 profit forecast by 29%/22% to $7.1/9.4 billion. The current share price corresponds to 2023/24e P/E 32/24x, P/B 1.8/1.7x.
We maintain the outperforming industry rating, considering that the active capital market package policy brings support to the valuation of the plate, we lower the target price by 11% to 19.4 yuan, corresponding to 2023/24e P/E 39/30x, P/B 2.3/2.2x, 25% upside than the current share price.
Risk
The turnover of the futures market has fallen sharply, the regulatory policy is uncertain, and the capital market has fluctuated sharply.