On November 24, CICC released a research report and reiterated Futu an Outperform rating with a $86 price target.

CICC pointed out the following highlights:

• Futu 3Q23 total revenue +36% YoY to HKD2.65billion, exceeding CICC's estimate by 4.4%;

• Non-GAAP net profit +44% YoY to HKD1.16 billion, in line with CICC's estimate;

• Futu added paying clients 65,000 to 1.651 million in 3Q (vs. 58,000 in 2Q);

• Total customer assets remained basically stable QoQ at HKD468.1 billion. The assets of Singaporean customers have maintained double-digit QoQ growth for five consecutive quarters；

• Wealth Management AUM +100% YoY to HKD51.9 billion, AUM in mutual funds soared/alternative products (including bonds) +86%/+285% YoY respectively；

• 3Q trading commissions/interest net income/other income accounted for 43%/51%/6% of net income (excluding interest expenses) respectively;

• Marketing expenses +21% QoQ, cost per customer for net new clients increased to HKD3,265；

• In September, the company offered US stock trading service in Japan, and US and Canadian stock trading services in Canada. The current number of Japanese users is about 400,000 (with DAU accounting for ~20%);

CICC maintained the target price of $86, which corresponded to 19x/17x 23e/24e P/E and 45% upside, and maintained an outperform rating.

Risks

Low market turnover; Competition exceeds expectations; International expansion not as expected.