Nanhua Futures released its 2023 annual report. Operating revenue for 2023 was 6.247 billion yuan, a year-on-year decrease of 8.4%, and net profit to mother in 2023 was 402 million yuan, an increase of 63.3% over the previous year. The decline in revenue was mainly due to the company's pressure reduction risk management business, while net profit continued to grow mainly due to the increase in interest income on futures margin interest, benefiting from high overseas interest rates after deducting risk management business.

Domestic business expanded year on year, and high interest rates from overseas boosted performance growth. (1) Increase the scale of customer rights through the establishment of new branches in Xi'an and Wuhan and the strengthening of institutional customer coverage. Furthermore, in 2023, the company will continue to strengthen the construction of self-operating channels to attract individual customers through various methods such as external streaming and live streaming. According to the company's financial report, as of the end of 2023, domestic futures brokerage business customer equity was RMB 21.248 billion, an increase of 11.32% over the previous year. (2) In terms of overseas futures business, the company further consolidated and developed its advantages in clearing business in 2023, and successfully obtained the Minneapolis Grain Exchange liquidation qualification. However, according to the total security deposit payable and the size of domestic equity, the scale of overseas equity declined slightly in 2023, but benefiting from the higher overseas interest rate environment, overseas business revenue was 567 million yuan, a significant increase from 231 million yuan in 2022.

Diversified business layout to build long-term core competitiveness. According to the company's financial report, in 2023 (1) market making business, the company added a total of 11 options and 18 futures market trading varieties, including vegetable oil options and peanut options, to achieve a 17.43% year-on-year increase in turnover. (2) Wealth management business. The total product scale of the company's public fund business was 21.111 billion yuan, an increase of 38.65% over the previous year. The asset management business actively strengthened active management capabilities, with a total scale of about 1,283 billion yuan, an increase of 75.27% over the previous year.

Profit forecasting and investment advice. Due to the reduction in base trade and capital constraints, revenue expectations were lowered. Revenue is expected to be 5.864 billion yuan for 24 years and net profit to mother of 486 million yuan, an increase of 21% over the previous year. The company's average PE value from the beginning of '23 is 24x, and the average PE value from the beginning of '24 is 16x. Based on the forecast of the Federal Reserve's interest rate cut in 2024, the PE valuation is 18x, which corresponds to a reasonable value of 14.4 yuan/share, giving the company an “increase in holdings” rating based on EPS of 0.80 yuan in 2024.

Risk warning. The economic downturn lowered handling fees, the impact of domestic and overseas monetary policies, interest income falling short of expectations, etc.