1. The company's main business

In terms of brokerage business, the company's agent futures trading volume increased from 5.28 trillion yuan to 12.74 trillion yuan in 2018-2022, with a CAGR of 24.63%. In 2022, due to a decline in futures sentiment, the company's brokerage revenue fell 18% year over year, but the decline was lower than the industry average (-26%). 2023H1 brokerage revenue fell 4% year on year, and the decline narrowed.

Risk management business includes margin trading, OTC derivatives and market making business. On the one hand, the scale of base difference trade continues to drop, and 23H1's base difference trading business achieved a current trade volume of 2,599 billion yuan, a year-on-year decrease of 13.40%; on the other hand, OTC derivatives are developing rapidly. In 2020-2022, the new nominal principal amount for OTC derivatives increased from 39.3 billion yuan to 71.7 billion yuan, and 23H1 added 42,551 billion yuan in nominal principal, an increase of 6.56% over the previous year. In terms of wealth management business, as one of the first institutions to obtain asset management licenses from futures companies, the company has formed a relatively complete wealth management business matrix. In 2019-2022, the revenue of Nanhua's wealth management business increased from 0.30 yuan to 61 million yuan, and the CAGR reached 26%.

2. Core advantages

Nanhua Futures has always adhered to a global layout. Currently, it is one of the futures companies with the most qualified Chinese background for liquidation, and it is also the company's core advantage. As of 2023H1, the overseas financial business of Nanhua Futures accounts for 43.27% of revenue. It is expected that in the future, the overseas financial services business will be the core competitiveness of Nanhua Futures, helping the company achieve rapid development.

3. Profit forecast

With the advantages of the company's international layout and complete clearing system, in the context of the Federal Reserve's interest rate hike, overseas business will become an important growth point in the future. Therefore, we expect the company's revenue in 2023-2025 to be 90.15, 110.78 billion yuan, and 11.978 billion yuan, respectively, with year-on-year growth rates of 32.14%, 22.87%, and 8.12%, respectively. Net profit attributable to mother was $413, 5.17, and 619 million yuan, respectively.

Risk warning

The reduction in industry commission rates will impact brokerage business;

Changes in the regulatory environment at home and abroad and in the futures industry;

Uncertainties such as international commodity prices and exchange rates.