Introduction to this report:

The company's 2023Q3 performance is under pressure, mainly due to the decline in investment income from the private equity business. It is expected that with the increase in the size of new funds and the withdrawal of old fund projects to redeem performance rewards, the company's future performance will be released at an accelerated pace.

Key points of investment:

Maintaining the “increase in holdings” rating, maintaining the target price of 33.16 yuan, corresponding to 2023 16xP/E: the company's 2023Q3 adjusted revenue (including private equity investment income) was 1,299 billion yuan, -14.15% year-on-year, and net profit was 668 million yuan, -12.68% year-on-year, in line with expectations. We maintain a net profit forecast of 16/21/26 billion yuan for 23/24/25, corresponding to an EPS of 2.11/2.69/3.44. Maintain the “increase in holdings” rating and maintain the target price of 33.16 yuan, corresponding to 16xP/E in '23.

The decline in private equity investment income was the main reason for the decline in the company's performance in the third quarter: 2023Q3 private equity business investment income was 493 million yuan, -21% year-on-year, contributing 60% of the decline in revenue. The decline in investment income was the main reason for the decline in the company's performance. The decline in investment income is mainly due to: 1) the delay in listing of the company's various projects awaiting IPO, such as Gurivat, Yitang Semiconductor, Jet Hydrogen Technology, and Honeycomb Energy; 2) According to the company's semi-annual report, based on corporate accounting standards, “the company expects to receive 1.1 billion yuan in excess performance compensation” not included in profit. Furthermore, cement prices continued to decline in the first three quarters of this year, and the company's cement business was also under pressure.

The company's initiation of a repurchase shows confidence. New fund raising continues to advance, and the withdrawal of old funds gradually realizes profits. Future results are expected to be released at an accelerated pace: the company recently announced that it plans to repurchase the company's shares for no less than 50 million yuan and no more than 10 million yuan, demonstrating the company's confidence. The total amount pledged by the company's new funds has reached 5.15 billion yuan, which is expected to lead to a positive increase in management fee revenue as the scale increases.

Many of the company's old fund projects, such as Aojie Technology and Zhiou Technology, have already been listed on the Science and Technology Innovation Board, and many other projects are also in the process of listing. The listing and subsequent exit will accelerate the implementation of the company's investment income and performance rewards, and the release of performance is expected to accelerate.

Catalyst: The company's new fund raising is speeding up.

Risk warning: The prosperity of the private equity investment industry has declined, and regulatory policies have changed.