Event: Caitong Securities released its third quarterly report for 2023. 9M23 realized revenue of 4.95 billion yuan / yoy+40%; return net profit of 1.5 billion yuan / yoy+39%; of which 3Q23 Company realized revenue of 1.48 billion yuan / yoy+12%/qoq-12%, return net profit of 460 million yuan / yoy+4%/qoq-14%;9M23 weighted ROE (under-annualized) 4.48%/yoy+0.87pct.

Q3 light capital business is increasing against the same trend last year, and the single-quarter asset management income reached an all-time high in the same period. According to the company announcement, 1) Q3 single quarter, net interest and long-stock investment (mainly Yongan futures, Caitong fund, Zheshang assets) fell 30% and 42% compared with the same period last year, of which the 1H23 profit yoy-30%, of Zheshang assets is expected to be the main reason for the decline in the company's long-stock investment income; net investment income is only 10 million in the same period last year, and equity investment is expected to pick up mainly due to the improvement of the equity market. In light capital income, brokers, investment banks and asset management are + 4%, + 49% and + 24% respectively compared with the same period last year, which is significantly better than the growth rate of the industry; the growth rate of brokerage income is expected to increase mainly due to the increase in market share compared with 1H23 expansion, while the company's single-quarter asset management income is at an all-time high, and management fee income is expected to increase mainly due to the increase in the scale of Caitong capital management. 2) from the perspective of 9M23 income structure, net investment accounts for 29%, asset management accounts for 24%, brokers account for 19%, investment banks account for 11%, long-stock investments and net interest account for 8% respectively. (note: Securities main income = operating income-other income-other business income-asset disposal income; investment income = investment income-joint venture income-fair value changes-exchange gains and losses)? The asset management of securities firms maintained the top level of the industry, and Caitong's management fees and performance remuneration increased. Caitong Capital Management, a wholly owned subsidiary of the company, holds a public offering license. according to the company announcement, 1H23 Caitong Capital Management achieves revenue of 790 million / yoy+15% and profit of 210 million / yoy+18%, in the first half of the year to maintain the fourth place in the industry. The scale of asset management was 294.9 billion at the end of the second quarter, an increase of 20% over the beginning of the year. Equity funds have won the top 10-year absolute income list for six consecutive quarters. It is expected that the performance compensation repair will be driven by the increase in management fee income brought about by the expansion of the scale and the recovery of the market. Caitong assets management business is expected to continue to grow steadily throughout the year.

The expansion of investment scale is more cautious, and the growth rate of investment business is fast under the base effect. According to the company announcement, the company's investment assets were 61 billion at the end of the third quarter, a decrease of 4.7% from the beginning of the year, of which trading and derivative assets were 47.1 billion, a slight increase of 6%. The company is expected to be more cautious about the expansion of investment assets; it is estimated that the annualized return on investment of 3Q23 is 1.05%, which is better than that of 3Q22 (0.09%) and 4Q22 (0.90%). The company's 9M22 investment return is only 150 million, and the low base investment business is expected to become the main engine of 23-year annual performance growth.

Both equity and debt have made breakthroughs, driving the rapid growth of investment bank income. According to wind, according to the release date statistics, 9M23's IPO and refinancing scale are + 221% and + 101% respectively from the same period last year, ranking from the 30th in the same period last year to the top 25; debt size is + 86% year on year, rising 6 places to 20th place.

Investment analysis opinion: the company's important profit pillar asset management business still achieved steady growth in the market fluctuation environment, and the capital strength of the rights issue landed in 22 years was further improved. When the market rebounded, the capital intermediary business plus leverage was sufficient, and the buy rating was maintained.

Considering that the ADT of A shares has still declined since the fourth quarter compared with the same period last year, the market ADT assumption has been lowered. The estimated net profit of 2023-2025E is 19.2,21.3 and 2.43 billion (the original forecast is 20.0,22.0 and 2.57 billion for 23-25 years), which is + 26%, + 11% and + 14% respectively over the same period last year. The current closing price corresponds to 1.09 times of the 23-year dynamic PB and 19 times of the dynamic PE.

Risk hints: the downward pressure on the economy has increased; the activity of stock-based trading in the market has dropped sharply; and the stock market has fallen sharply.