Matters:
Company announcement: On November 14, 2023, the company issued the “Compass 2023 Stock Options Incentive Plan (Draft)”. The number of stock options to be granted in the incentive plan is 8.1293 million, accounting for about 1.99% of the company's total share capital at the time of the announcement of this incentive plan. The exercise price of the stock options granted is 59.20 yuan/share, and the total number of people to be granted incentives is 354 people.
Guoxin African Bank's opinion: Based on the impact of fluctuations in the equity market on the securities business, our profit forecast for the company was lowered. The estimated net profit for 2023-2025 is 185 million yuan, 242 million yuan, and 309 million yuan, with growth rates of -45%, 31%, and 28% respectively. The PE corresponding to the current stock price is 136.5/95.3/77.4x, and PB is 11.8/11.7/9.0x. The company will steadily develop securities business in the future. As market activity improves, the company will continue to be optimistic about the development of the Internet securities business and maintain the company's “buy” rating.
Commentary:
Enhance core competitiveness and demonstrate confidence in future development
The company launched two equity incentive plans in 2021 and 2022, respectively. Among them, the 2021 incentive plan has entered the second exercise period in June 2023. The number of shares granted is 2,562 million shares, accounting for about 0.63% of the company's total share capital on the day the revised incentive plan was announced. The exercise price is lower than the stock price during the exercise period, and the incentive effect is good; the 2022 incentive plan is still being implemented, and this equity incentive plan is conducive to further improving the company's long-term incentive mechanism, fully mobilizing the enthusiasm of directors, senior management and core technical staff, stabilizing the core team, enhancing the appeal of outstanding talents, and reducing brain drain.
I am optimistic about the Internet securities business and look forward to the accelerated development of McGill Securities. Judging from the requirements of equity incentive assessment indicators, the company's assessment focuses on revenue and securities brokerage business: during the first exercise period, based on 2023, the total operating income growth rate in 2024 will not be less than 12%, or the net income growth rate of handling fees and commissions will not be less than 50%. In the second exercise period, 1) Based on 2023, the growth rate of total operating income in 2025 is not less than 26%, or the growth rate of net income from fees and commissions is not less than 125%. 2) Based on 2024, the growth rate of total operating income in 2025 is not less than 12%, or the net income growth rate of fees and commissions is not less than 50%. In the first three quarters, brokerage revenue declined due to declining trading volume and falling institutional commission rates. McGo Securities's business growth momentum was good in the first three quarters. Net income from brokerage business+net interest income all increased quarter by quarter; investment income reached 0.4 billion yuan, up 4.8 times from the beginning of the year; at the end of the third quarter, brokerage securities trading was 2.37 billion yuan, up 103.7% from the beginning of the year and 17% from the second quarter, indicating that the number of brokerage customers continued to increase, but operating profit was still not profitable. The company will continue to increase the integration of McGo Securities. It is estimated that the fixed capital increase (no more than 3 billion yuan) will be invested in McGow Securities to enrich capital. Empowered by fintech, it will seize customer conversion opportunities, and have room for imagination in directing the flow of paying customers with a stock of nearly 1.5 million.
Investment advice: The company will steadily develop securities business in the future. As market activity improves, it will continue to be optimistic about the development of the Internet securities business and maintain the company's “buy” rating
Based on the impact of fluctuations in the equity market on the securities business, our profit forecast for the company was lowered. The estimated net profit for 2023-2025 is 185 million yuan, 242 million yuan, and 309 million yuan, with growth rates of -45%, 31%, and 28% respectively. The PE corresponding to the current stock price is 136.5/95.3/77.4x, and PB is 11.8/11.7/9.0x. The company will steadily develop securities business in the future. As market activity improves, the company will continue to be optimistic about the development of the Internet securities business and maintain the company's “buy” rating.
Risk warning
The risk of market fluctuations, the risk of business innovation, the risk that the integration results of McGill Securities will not be as effective as expected, and the risk of increased market competition.