Description of the event

The company released its report for the third quarter of 2023. During the reporting period, it achieved operating income of 4.955 billion yuan, +39.78% year-on-year, net profit of 1,501 billion yuan, +39.11% year-on-year, and a weighted average ROE of 4.48%, an increase of 0.87 pct over the previous year.

Incident reviews

Self-management boosted performance, and asset-light business improved month-on-month. In the first three quarters of 2023, the company's brokerage, investment banking, asset management, net interest income, and self-operated business achieved revenue of 9.01, 5.49, 11.80, 3.99, and 1410 billion yuan respectively, a year-on-year decrease of 1.25%, an increase of 62.13%, an increase of 11.83%, a decrease of 30.91%, and an increase of 9499.50%. Proprietary business is the main driver of performance growth. Q3 The company's various business revenues were 3.23, 2.30, 4.80, 1.43, and 168 million yuan respectively, with changes of +6.57%, +38.46%, +24.23%, -0.10%, and -68.34%, respectively. Brokerage, investment, and asset management all improved month-on-month.

Investment banks have brought in a large number of teams, and IPOs are growing rapidly. The company is deeply involved in Zhejiang, grasped the “Phoenix Plan 2.0” opportunity, introduced a large number of teams, and is committed to building a first-class investment bank. As of October 29, 2023, 81 sponsor agents were registered, of which 20 were newly registered in 2023, accounting for 24.67%. Benefiting from the introduction of the investment banking team, the scale of corporate equity and bond financing has increased dramatically. 1) Equity financing: As of October 29, 2023, the company's equity financing scale was 110.726 billion yuan, an increase of 89.09% over the previous year. The IPO scale was 2,783 billion yuan, an increase of 220.62% over the previous year, and the market share reached 0.84%, an increase of 0.65pct over the previous year. 2) Debt financing: As of October 29, 2023, the scale of debt financing was 108.477 billion yuan, an increase of 91.41% over the previous year.

3) Project reserves: Affected by the 827 policy, the IPO was phased down. The company withheld 4 orders for terminated and suspended project reserves, ranking 22nd in the industry.

Focusing on institutional reforms, the wealth management path is clear. The company's wealth management transformation path is clear. The capital asset side works collaboratively. 1) Asset management: CaiTong Asset Management has gradually built a “one main and two wings” business layout, consolidated active management capabilities, actively carried out asset securitization business and capital market services to meet clients' investment and financing needs, and achieve capital and asset-side collaboration. As of October 29, 2023, the company's asset management scale was 10.403 billion yuan, ranking 3rd in the industry (brokerage asset management ranking). At the same time, the company's participating companies, Yongan Futures, Yongan Guofu, and CaiTong Fund, have differentiated competitive advantages in derivatives and fixed fund growth. 2) Wealth management: The company focuses on institutional reforms, strengthens technological empowerment, expands Internet channels, establishes an institutional account manager system, and implements differentiated commission settings at counters through differentiated commission algorithm strategies. Use diversification of investment, investment and research, seed funds, and employee stock ownership plans to enhance the ability to serve institutional clients.

Self-management is highly flexible, and long-term stock investment contributes to stable earnings. 1) In the company's self-operated business in the first three quarters of 2023, net investment income, investment income from joint ventures, and net income from changes in fair value were 7.09, 3.89, and 1,090 million yuan respectively. Net income from changes in fair value was the main source of elasticity, reversing losses of 1,543 billion yuan over the same period last year. 2) The company's fair value variable income mainly comes from long-term equity investment in the profit contributions of the three participating companies, China CaiTong Fund, Zheshang Asset, and Yongan Futures. In the first three quarters of 2023, long-term stock investment earnings accounted for 25.94% of net profit.

Investment advice

The company is deeply involved in Zhejiang, serves Zhejiang merchants, and has a high degree of regional empowerment. With the steady progress of the company's investment banking business and the active transformation of wealth management, the company achieved operating income of 6.561 billion yuan, 7.847 billion yuan, and 9.140 billion yuan respectively from 2023 to 2025. Net profit was $2.154 billion, $2,888 billion and $3.485 billion, up 41.98%, 30.35%, and 24.11%; PB was 1.06/0.92/0.81, respectively, maintaining the “buy-A” rating.

Risk warning

Financial markets have fluctuated greatly, business progress has fallen short of expectations, and the company has experienced major risk incidents.