Key points of investment
Overview of the data
In 2023, Dongfang Wealth achieved total operating income of 11.08 billion yuan, a year-on-year decrease of 11.2%; net profit to mother of 8.19 billion yuan, a year-on-year decrease of 3.7%; and a weighted average return on net assets was 11.94%, down 2.46 pcts year on year. Net profit for 23Q4 was 1.98 billion yuan, up 3% year on year and flat from month to month. Performance was in line with expectations.
The decline in affiliate sales and commission revenue is in line with the level of market activity
Consignment business: In 2023, Dongfang Wealth achieved fund sales revenue of 3.63 billion yuan, a year-on-year decrease of 16%, which was the main drag on the decline in total revenue. Market trading activity was still low in 2023. The average number of active daily visitors to the Tiantian Fund service platform was 1.48 million, down 31% year on year. The company's non-cargo base and cargo base sales fell 24%/22% year on year to 9085/639.4 billion yuan, respectively. At the end of 23Q4, Tiantian Fund's escrow share+mixed and non-monetary fund holdings were 4029/549.6 billion yuan respectively, continuing to rank third among consignment agencies. In 2023, Dongfang Wealth Securities was selected into the list of personal pension fund sales agencies to explore new revenue growth points.
Securities business: In 2023, Oriental Wealth achieved net income of 4.97 billion yuan from the securities brokerage business, a year-on-year decrease of 8%. The market share of the brokerage business increased by 0.13 pct to 4.01% year on year, and the market share of the two finance business increased sharply by 0.43 pct to 2.8% year on year. The development momentum of the two finance business was relatively good, and the gap with the market share of the brokerage business gradually narrowed.
Equity incentives implement performance assessments, and buyback cancellations boost confidence
The quality of the main business is high, and technological empowerment is deepened: In 2023, Dongcai Securities maintained an AA rating and was selected as a “white list” of securities companies, and the quality of the company's development was high. After the establishment of the Artificial Intelligence Division in 2023, in January 2024, the “Wonderful” financial model independently developed by the company officially began closed testing. It is expected to rely on the advantages of the DongfangWealth Internet wealth management integrated operation platform to empower the main business in vertical financial scenarios.
Active buyback incentives to enhance market confidence: In August 2023, the company introduced a share repurchase plan to enhance investor confidence. Currently, 71.452,600 shares of the company have been repurchased, using a total capital of 1 billion yuan. All repurchased shares will be cancelled, further boosting investor confidence. On March 14, 2024, the company issued a stock incentive plan announcement. The 40 million restricted shares to be awarded to the incentive target account, accounting for about 0.25% of the company's total share capital at the time of announcement. The incentive plan's performance assessment is 2024-2026, based on 2023 net profit. The 2024-2026 net profit growth rate is not less than 10%/20%/30%, and equity incentives are expected to promote performance growth.
Profit forecasting and valuation
Dongfang Wealth's net profit in 2023 declined slightly in an environment of low market activity. The company's share buyback showed confidence, and the incentive plan is expected to boost performance growth. The net profit growth rate for 2024-2026 is expected to be 10%/11%/12%, respectively, the corresponding EPS is 0.57/0.63/0.70 yuan, respectively, and the PE corresponding to the current price is 24/22/19 times. Maintain the target price of 18.89 yuan, corresponding to 2024 EPE, 33 times, and maintain the “buy” rating.
Risk warning
The macroeconomy declined sharply; capital market prosperity fell short of expectations; competition in the fund marketing industry intensified.