Description of the event
The company released its annual report. In 2023, it achieved operating income of 6.247 billion yuan, -8.45% year on year, and operating income of 1,292 billion yuan, up 35.70% year on year; net profit to mother was 402 million yuan, +63.32% year on year, weighted average ROE of 11.46%, +3.71 pct year on year.
Incident reviews
The main business bucked the trend. The net revenue and profit of the futures industry all declined in 2023. The company grasped the trend of market institutionalization and industrialization to help its main business grow against the trend. During the reporting period, the company's main business all achieved growth. The brokerage business (excluding customer margin interest income), asset management business, and net interest income reached 503 million yuan, 97 million yuan, and 545 million yuan respectively, up 18.73%, 61.77%, and 67.02% respectively.
Overseas business has grown significantly. The company adheres to an internationalization strategy, coordinates futures, asset management and securities business licenses. Overseas business has grown in an orderly manner, and the domestic and foreign collaboration system has been further improved. The wholly-owned subsidiary Henghua International achieved operating income of 567 million yuan in 2023, an increase of 145%, and net profit of 359 million yuan, an increase of 190%. 1) Overseas business fee revenue of 128 million yuan, +30.36% year-on-year. 2) High overseas interest rates helped customers increase significantly in margin interest income. In 2023, the company's net margin interest income of 537 million yuan was 537 million yuan, an increase of 71.56% over the previous year. 3) The company further consolidated and developed its advantages in clearing business and obtained liquidation qualifications from the Minneapolis Grain Exchange. Currently, it has 13 membership qualifications and 10 clearing seats to promote the development of different types of clearing customers.
Domestic business outperformed the industry. 1) The company's net revenue from domestic business fees in 2023 was 483 million yuan, +20.96% year-on-year, far higher than the industry level of -4.85%. 2) The company's domestic customer equity at the end of 2023 was RMB 21.248 billion, +11.32% year on year, and customer equity of industry customers was 1.42 trillion yuan at the end of the year, -3.92% year-on-year. Benefiting from the growth in customer equity and the overseas high interest rate environment, the company's net interest income increased significantly in 2023. 3) The risk management business is progressing steadily. The scale of margin trading expanded, with net trade revenue of 56 million yuan in 2023, +240.59% year-on-year, and the OTC derivatives business added a nominal principal of 79.114 billion yuan, or +10.27% year-on-year.
Wealth management transformation is being promoted steadily. In 2023, the company actively strengthened its active management capabilities and promoted channel construction. The scale of public offering management reached 21.111 billion yuan, an increase of 38.65% over the previous year, and the scale of asset management reached 1,283 billion yuan, an increase of 75.27% over the previous year. The revenue of the consignment fund was 4.496 million yuan, an increase of 163.83% over the previous year.
Investment advice
The company is the first futures private listed company. The overseas business has a comprehensive financial license. With the two-way opening of the capital market, as a bridgehead for the Chinese futures market, the company is expected to use the advantages of the clearing system to obtain overseas customers and has strong growth potential. The company is expected to achieve operating income of 6.889 billion yuan, 7.584 yuan and 8.075 billion yuan respectively from 2024 to 2026, an increase of 10.31%, 10.07% and 6.48%; net profit to mother of 4.85 yuan, 534 million yuan and 575 million yuan, an increase of 20.57%, 10.28% and 7.56%; PB will be 1.63/1.52/1.47, respectively, maintaining a “buy-B” rating.
Risk warning
The financial market fluctuated greatly, business progress fell short of expectations, and the company experienced high-risk events.