[Event] In the first three quarters of 2023, CICC achieved operating income of 17.47 billion yuan, -9.9%; net profit of 4.61 billion yuan, -23.4%; corresponding to EPS of 0.85 yuan, ROE of 4.8%. Brokerage/investment banking/asset management/interest/proprietary income accounted for 20%/15%/5%/-5%/40% of revenue, respectively. The third quarter achieved operating income of 5.05 billion yuan, -30.5% year-on-year, and net profit of 1.05 billion yuan, or -51.8% of the same period last year. The company's operating income and net profit declined, mainly due to a decrease in net income from investment banking; at the same time, earnings from the foreign exchange derivatives business carried out to hedge against foreign currency exposure declined due to exchange rate fluctuations.

Commission rates in the industry declined marginally, and the company's brokerage revenue declined slightly year over year. Brokerage revenue for the first three quarters of 2023 was 3.51 billion yuan, -5.7% year-on-year, accounting for 20.1% of operating income. Brokerage revenue for the third quarter was 1.02 billion yuan, -11.3% year-on-year, accounting for 20.1% of operating income. The company focuses on improving the full-spectrum and three-dimensional buyer investment system, building an omni-channel and multi-scenario customer acquisition model, continuing to deepen digital transformation, and helping improve the customer experience through fintech to meet the needs of “one thousand people, one person many faces” wealth management needs. The balance of the company's two loans was 34.5 billion yuan, +5.7% year-on-year, with a market share of 2.2%.

Maintaining an advantageous position in the investment banking business, the scale of principal underwriting of bonds continues to rise. Investment banking revenue for the first three quarters was 26.02 billion yuan, -43.7% year on year; investment banking revenue for the third quarter was 631 million yuan, -68.1% year on year. In the first three quarters, the equity business underwriting scale was -37.6% year on year, and the bond business underwriting scale was +12.4% year on year. The shareholder underwriting scale was 111.05 billion yuan, ranking fourth; of these, there were 14 IPOs, with a capital raising scale of 26.1 billion yuan; and 34 additional financings, with an underwriting scale of 85 billion yuan. The main underwriting scale of bonds was 803 billion yuan, ranking 3rd; of these, the underwriting scale of local government bonds, financial bonds, and corporate bonds was 311.8 billion yuan, 2006 billion yuan, and 13.1 billion yuan respectively. There are 20 IPO reserve projects, ranking 7th, including 7 main boards in the two markets, 8 GEM, and 5 science and technology innovation boards.

Insist on promoting the high-quality development of asset management business. Asset management revenue for the first three quarters of 2023 was 950 million yuan, -9.6% year on year; asset management business revenue for the third quarter was 300 million yuan, -14.3% year on year. The company is strengthening strategic business layout and product supply around topics such as old-age financial management, green finance, dual cycle, and rural revitalization.

Single-quarter investment income (including fair value) rebounded in the third quarter. In the first three quarters of 2023, the company achieved investment income (including fair value) of 6.98 billion yuan, -2.2% year-on-year; investment income in the third quarter (including fair value) of 2.55 billion yuan, +22.1% year-on-year. The decline in the company's investment income was mainly affected by equity trading financial instruments and derivative financial instruments. Under the overall fluctuation and adjustment of stock market conditions, the trading demand of OTC derivatives business customers decreased, resulting in a decrease in the net related investment income.

Investment advice: We expect net assets per share for 2023-25E to be $17.79/18.88/20.03, respectively. We will give them 1.0-1.2x PB for 2023, corresponding to a reasonable value range of RMB 17.79-21.35, (exchange rate conversion: HK$1 = $0.91769, corresponding reasonable value range is HK$19.39-23.26), maintaining a “superior to market” rating.

Risk warning: The market fluctuates sharply, the stock market is declining overall, and market supervision has been further strengthened.