Brokerage asset management bucked the trend, and investment banks and self-employment increased year on year, maintaining a “buy” rating. The company's total operating income/net profit for the first three quarters of 2023 was 49.5/1.5 billion yuan, +40%/+39%. Net profit for the third quarter was 4.6 billion yuan, +4% year-on-year and -14%. The performance was in line with expectations. The company's annualized ROE for the first three quarters was 6.0%, compared to +0.8 pct in 2022. The equity multiplier at the end of the period (after deducting customer security deposit) was 3.02 times, -7% over the previous month, and -5% compared to the beginning of the year. Brokerage and asset management bucked the trend, and earnings from investment banks and proprietary investments maintained a high year-on-year increase. Considering the slump in stock market trading volume, we slightly lowered our 2023-2025 net profit forecast to 21.1/27.4/3.44 billion (previously adjusted 22.6/28.5/35.6), to +39%/+30%/+25% year-on-year, and EPS of 0.5/0.6/0.7 yuan. The company has outstanding location advantages, fee-type business bucked the trend, and growth is outstanding. The company cooperates closely with Ali Group and is expected to fully benefit from the tripartite liberalization of diversion. The current stock price corresponds to PB1.1/1.1/1.0 times, maintaining the “buy” rating.

The brokerage and asset management business bucked the trend, and the growth rate of the investment banking business was impressive (1) The brokerage business net revenue for the first three quarters was 900 million, -1% year-on-year, and the brokerage business net revenue for the third quarter was 320 million, +4% year-on-year, +7%. The growth against the trend may be related to strong Internet customer acquisition capacity. The average daily stock turnover in the 2023Q3 market was -13% year-on-year, -21% month-on-month. (2) The net income of investment banking business in the first three quarters was 550 million yuan, +62% year-on-year. The net income of investment banks for the third quarter alone was 230 million yuan, +49% year-on-year, +38%. The IPO underwriting scale for the first three quarters was 2.78 billion yuan, +221% over the same period last year. (3) Net income from asset management business in the first three quarters was 1.18 billion yuan, +12% year on year, net revenue from asset management business in the third quarter was 480 million, +24% over the same period. In an environment where public placement fees were reduced and the size of the brokerage asset management industry declined, corporate asset management revenue bucked the trend, or was related to the contrarian growth in brokers' private equity management scale. 2023H1 pooling/special asset management scale was +32%/+185% year on year. At the end of 2023Q3, CaiTong Asset Management's non-goods AUM/mixed stock AUM was 87.7/15 billion respectively, -36%/-0.3% year-on-year and -12%/-20% month-on-month.

Investment income maintained a high year-on-year increase. Pressure on the stock and bond market in the third quarter dragged down the month-on-month growth rate (1) Investment income for the first three quarters (including profit and loss from changes in fair value) was $1.90 billion, +214% year-on-year, and $290 million in the third quarter, +29% year-on-year, -5% month-on-month. Self-operated financial assets at the end of the period were 47.2 billion, +24% year-on-month, -3% month-on-month. The company's annualized self-operated investment yield for the first three quarters was 4.10% (2023H1 was 5.3%), and the poor month-on-month performance of the stock and bond market in the third quarter was dragged down. The 2023Q3 Shanghai and Shenzhen 300/Wande Quan A fell 4.0%/4.3% (2023Q2 respectively -5.1%/-3.2%); the 2023Q3 pure debt base rose 0.50% (2023Q2 rose 1.1%).

Risk warning: Risk of market fluctuations; growth in wealth management and asset management falls short of expectations.