[Event] China Merchants Securities announced results for the first three quarters of 2023: achieved operating income of 14.87 billion yuan, -2.8%; net profit of 6.40 billion yuan, +1.9% year-on-year; corresponding to EPS of 0.69 yuan, ROE 5.82%, year-on-year -0.05 pct. Brokerage, investment banking, asset management, interest, and self-employment accounted for 29%/5%/4%/9%/32% of operating income, respectively.
The third quarter achieved revenue of 4.08 billion yuan, -12.8% year-on-year and -32.4% month-on-month. Net profit of the mother was 1.67 billion yuan, -16.0% year-on-year and -32.1% month-on-month.
Brokerage revenue continues to be under pressure. The company's brokerage revenue for the first three quarters of 2023 was 4.28 billion yuan, -13.9% year-on-year, accounting for 28.8% of revenue; brokerage revenue for the third quarter was 1.35 billion yuan, -20.1% year-on-year and -11.1% month-on-month. The balance of the company's two loans was 82.3 billion yuan, and the market share was stable at 5.2%. The average daily stock base trading volume of the entire market in the first three quarters of 2023 was 973.9 billion yuan, -5.2% year-on-year, and the balance of the two loans was 1590.9 billion yuan, +3.3% over the beginning of the year.
The investment banking business is growing steadily. In the first three quarters of 2023, the company's investment banking business revenue was 750 million yuan, or -31.6%; in the third quarter, investment banking revenue was 300 million yuan, +4.4% year-on-year, +2.7%. The shareholder underwriting scale was 19.17 billion yuan, with a year-on-year ratio of -37.6%, ranking 12th; of these, 3 IPOs, with a capital raising scale of 3.4 billion yuan; and 14 additional financings, with an underwriting scale of 15.7 billion yuan. The principal underwriting scale of bonds was 231.3 billion yuan, +12.8% over the same period, ranking 10th; of these, the underwriting scale of financial bonds, ABS, and corporate bonds was 84 billion yuan, 63.3 billion yuan, and 60.3 billion yuan respectively. There are 15 IPO reserve projects, ranking 8th, including 3 on the main boards of the two markets, 1 on the Beijing Stock Exchange, 7 on the GEM, and 4 on the Science and Technology Innovation Board.
Asset management business revenue declined. The company's asset management business revenue for the first three quarters of 2023 was 550 million yuan, -13.0% year-on-year.
Asset management revenue for the third quarter was 180 million yuan, -12.5% year over year and -8.0% month on month. As of the end of the first half of 2023, the asset management scale was 278.1 billion yuan, -28.8% year-on-year.
The decline in the market has led to a decline in the income of self-operated businesses. The company's income and investment income for the first three quarters of 2023 (including fair value) was 4.72 billion yuan, +3.3% year-on-year, of which net investment income (including fair value) for the third quarter was 8.0 billion yuan, -46.9% year-on-year and -63.5% month-on-month. We believe that the main reason for the decline in self-employment income is the poor performance of the equity market. The Wandequan A Index fell 4.33% in the third quarter of 2023.
Investment advice: We expect the company's 2023-25E EPS to be 0.97/1.11/1.22 yuan and BVPS to be 12.33/13.27/14.29 yuan respectively. We are optimistic about the business collaboration between China Merchants Securities, China Merchants Group, and China Merchants Bank, and give it 1.2-1.3x P/B for 2023, corresponding to the reasonable value range of 14.80-16.03 yuan, maintaining the “superior to the market” rating.
Risk warning: Trading volume continues to decline, and investment returns continue to decline due to increased volatility in equity markets.