The Zhitong Finance App learned that Guotai Junan released a research report saying that in 2023Q1-Q3, the adjusted revenue of 43 listed brokerage firms was +5.83% to 319.103 billion yuan, and net profit was +6.46% year-on-year to 109.973 billion yuan, and the performance improved year over year. The bank expects the adjusted operating income of listed brokerage firms to be +10.81% to 466.991 billion yuan in 2024, and net profit of the net profit of listed brokerage firms to +12.68% year-on-year to 16.679 billion yuan. Furthermore, it is expected that more policies to cultivate first-class investment banks and investment institutions will be introduced, which will benefit leading brokerage firms and spawn more mergers, acquisitions and restructuring. It is expected that market concentration will be further concentrated on the top, and it is recommended to increase their holdings in leading high-quality brokerage firms and those with expectations of restructuring and mergers and acquisitions.

Guotai Junan's views are as follows:

Review 2023: Listed brokers' performance improved year on year, mainly due to investment growth driven by market recovery.

1) In 2023Q1-Q3, the adjusted revenue of 43 listed brokerage firms was +5.83% to 319.103 billion yuan, net profit was +6.46% year-on-year to 109.973 billion yuan, and the performance improved year over year; 2) 2023Q1-Q3, the investment business ratio of +64.52% to 110.928 billion yuan in the context of the year-on-year recovery in the market was the main reason for the increase in the performance of listed brokerage firms. The sharp increase in investment business was mainly due to the recovery in the market, which drove the return on investment to +0.64 pct to 1.98% year on year; the size of financial assets was +10.98% to 5.89 trillion yuan compared to the end of 2022, further increasing earnings.

2024 outlook: Capital market reforms are deepening, and the securities industry will face a restructuring of the securities industry.

1) The goal of the Central Financial Work Conference is to accelerate the construction of a financial powerhouse; it is expected that capital market reforms will be further deepened and will spawn three major changes in the securities industry; 2) Customer demand: the entry of medium- to long-term institutional capital into the market will spawn more business demand for brokerage institutions, and leading brokerage firms with competitive advantages in institutional business will benefit more; 3) Business model: Policies supporting high-level technological self-reliance and self-improvement will spawn changes in the service model of brokerage enterprises, and leading brokerage firms can be better able to meet the comprehensive, professional and full-life cycle service needs of technology enterprises; 4) Competition pattern: more first-class investment banks and investment institutions Desk It favors leading brokerage firms and spawns more mergers, acquisitions, and restructuring, and it is expected that market concentration will be further concentrated towards the top; 5) It is estimated that in 2024, the adjusted operating income of listed brokerage firms will reach 466.991 billion yuan, and net profit of listed brokerage firms will be +12.68% year-on-year to 166.679 billion yuan.

Investment advice: Focus on restructuring the industry pattern and increase holdings of leading high-quality brokerage firms and those with expectations of restructuring and mergers and acquisitions.

1) Individual stocks recommend CITIC Securities (600030.SH) and Huatai Securities (601688.SH). The beneficiaries are China Galaxy (), Fangzheng Securities (), Zheshang Securities (), Guolian Securities (Forwarding), and Jinlong Shares (000712.SZ); 601881.SH 601901.SH 601878.SH 601456.SH

2) As of November 20, the PB valuation of the brokerage sector was 1.39 times, ranking at 16.6% since 2012, with a high margin of safety and cost effectiveness.

Catalyst: Accelerate the introduction of measures to deepen capital market reforms.

Risk warning: The entry of medium- to long-term institutional capital into the market fell short of expectations, countercyclical adjustments in the primary and secondary markets continued, restructuring and mergers and acquisitions progressed slowly, and the equity market fluctuated greatly.