Event: Zheshang Securities released its third quarterly report in 2023. 9M23 realized net profit of 1.33 billion / yoy+15%3Q single-quarter profit of 420 million / yoy-2% / qoq-1%. 9M23 revenue 12.62 billion / yoy+9%,3Q single quarter revenue 4.17 billion / yoy+1%. 9M23 weighted average ROE 5.01% / yoy + 0.36pct.
Single-quarter profit performance was robust, mainly due to a sharp drop in management costs. The main income of 9M23 Securities is 4.38 billion yuan / yoy+10%, of which 3Q single quarter is 1.2 billion yuan / yoy-21%/qoq-22%. 1) main revenue split: 9M23's brokerage, investment bank, asset management, net interest and net investment realized income of 13.2,6.8,2.6,5.7 and 890 million respectively, which was-9%, + 30%,-23%, + 0.2% and + 32% respectively compared with the same period last year. 2) in terms of the composition of main income, brokers account for 30.2%, investment banks for 15.4%, asset management for 5.9%, net interest for 12.9%, and net investment for 20.2%. 3) the company's 3Q single-quarter profit growth rate (- 2% compared with the same period last year) is significantly better than that of the main income growth rate (- 21%). Due to the pressure drop in management fees, 3Q single-quarter business and management fees of 730 million / yoy-17%/qoq-25%, have decreased significantly compared with the same period last month, and the management fee is stable. 3Q single-quarter 60.7%/yoy+3.1pct/qoq-2.6pct.
The rate of return on investment in a single quarter is under pressure, and investment leverage is expanding steadily. The total assets of the company at the end of 3Q23 are 1470 billion yuan / yoy+11%/qoq+1%; final operating leverage 4.82x/yoy+0.40x/qoq+0.07x. In terms of investment business, the financial investment scale of 3Q23 at the end of the year was 50.7 billion yuan / yoy+12%/qoq+7%, investment leverage 1.91x Universe 0.15x yoy+12%/qoq+7%, 0.10x; the single-quarter investment return is under pressure, and the company's 3Q single-quarter annualized investment return-0.01%/yoy-2.8pct/qoq-2.4pct, the cumulative annualized return 2.45%/yoy+0.5pct in the first three quarters.
Brokerage business follows the market, and the share of finance and finance has increased slightly. Brokerage business: 9M23's brokerage business income of 1.32 billion yuan / yoy-9%, is expected to decline mainly due to active market trading and downward rates (9M23 Shanghai and Shenzhen stock ADT yoy-4%). In terms of credit business, at the end of 3Q23, the company raised 19.5 billion yuan / yoy+13%/qoq+1.1% (market 3Q23 balance qoq-2%), and its share increased; at the end of the period, the company bought 6.3 billion yuan of resale assets / yoy-31%/qoq+11%, and remained stable.
Investment analysis opinion: maintain the recommended rating of Zheshang Securities. It is estimated that the net profit of Zhejiang Merchants Securities in 2023-2025e is 1.78 billion yuan, 2.07 billion yuan and 2.26 billion yuan respectively, which is 1.46,1.38,1.30times corresponding to the closing price of company 23-25e compared with the same period last year. The dynamic PE is 21.9,18.8,17.2 times.
Risk tips: the macroeconomic downturn; the stock market fell sharply; the process of residents' funds entering the market slowed down.