Investment highlights: In the third quarter of 2023, apart from the significant month-on-month increase in the company's self-operated revenue, the rest of the business was under pressure year on year and month on month. We are optimistic about the company's long-term wealth management transformation and growth in fund management. The target price is 12.38 yuan, maintaining the “superior to the market” rating.
[Event] Orient Securities announced results for the third quarter of 2023:1) The first three quarters of 2023 achieved operating income of 13.7 billion yuan, +13.9% year-on-year; net profit of 2.86 billion yuan, +42.7%; corresponding to EPS of 0.32 yuan, ROE 3.67%, +0.88pct year-on-year. 2) The third quarter achieved revenue of 5.00 billion yuan, +5.7% year-on-year and +17.4% month-on-month. Net profit of the mother was 960 million yuan, -29.5% year-on-year, doubling month-on-month. 3) In addition to the significant month-on-month increase in self-operating revenue in the third quarter, the rest of the company's business was under pressure year over year and month on month.
We believe that the month-on-month doubling of the net profit of the third quarter was mainly due to the high credit impairment calculation for the second quarter, which led to a low net profit base. The company's credit impairment in the second quarter was as high as 940 million yuan, and the credit impairment for the third quarter was only 500 million yuan.
Brokerage revenue declined in the third quarter. The fiscal revenue for the first three quarters of 2023 was 2.16 billion yuan, -6.8% year-on-year, accounting for 15.7% of revenue; brokerage revenue for the third quarter was 690 million yuan, -8.9% year-on-year and -10.7% month-on-month. The balance of the company's two loans is 20 billion yuan, and the market share is stable at 1.3%. 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 remains steady. Investment banking revenue for the first three quarters of 2023 was 1.19 billion yuan, -13.3% year on year; investment banking business revenue for the third quarter was 450 million yuan, -11.3% year on year, -0.5% month on month. The shareholder underwriting scale was 10.41 billion yuan, with a year-on-year ratio of -55.1%, ranking 24th; of these, 5 IPOs raised 5.9 billion yuan; and 6 additional financings, with an underwriting scale of 4.5 billion yuan. The main underwriting scale of bonds was 306.6 billion yuan, +19.6% over the same period, ranking 8th; among them, the underwriting scale of local government bonds, corporate bonds, and financial bonds was 128.8 billion yuan, 79.1 billion yuan, and 55.1 billion yuan respectively, ranking 17th, with 4 main boards of the two markets, 1 Beijing Stock Exchange, and 1 GEM.
Asset management revenue declined year on year, leading the industry in asset management scale and product yield. Asset management revenue for the first three quarters of 2023 was 1.62 billion yuan, -21.3% year-on-year. Asset management revenue for the third quarter was 4.7 billion yuan, -28.2% year on year and -14.8% month on month. As of the end of the first half of the year, the asset management volume of the Eastern Securities Asset Management was 263.3 billion yuan, -7.5% compared to the beginning of the year.
In the first half of 2023, the asset management and asset management business of Eastern Securities ranked first in the industry in net revenue.
Self-employment revenue increased significantly in the third quarter from month to month. In the first three quarters of 2023, the company achieved investment income (including fair value) of 2.42 billion yuan, +71.0% year-on-year, of which net investment income (including fair value) for the third quarter was 900 million yuan, -10.2% year-on-year and +146.1%.
Investment suggestions: We expect the company's 2023-25E EPS to be 0.48/0.57/0.65 yuan and BVPS to be 8.84/9.20/9.60 yuan respectively (the original forecast was 0.52/0.57/0.65, and the BVPS was 8.88/9.21/9.61 yuan respectively). We are optimistic about the company's wealth management transformation and growth in fund management. We gave it 1.4x P/B for 2023, corresponding to the target price of 12.38 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 the equity market.