Core views
In 2023, the company achieved revenue of 11.081 billion yuan, a year-on-year decrease of 11.25%; net profit to mother was 8.193 billion yuan, a year-on-year decrease of 3.71%. 23Q4 achieved revenue of 2,593 billion yuan in a single quarter, down 11.32% year on year; realized net profit to mother of 1,984 billion yuan, up 3.60% year on year, basically in line with expectations. The company's securities and fund business declined due to market shocks, respectively, but the market share level bucked the trend, demonstrating the resilience of leading companies. The company deployed AI during the year, hoping to improve quality and efficiency to open up a new growth curve.
occurrences
On March 15, 2024, Dongfang Wealth released its 2023 financial report.
Brief review
In 2023, the company achieved revenue of 11.081 billion yuan, a year-on-year decrease of 11.25%; net profit to mother was 8.193 billion yuan, a year-on-year decrease of 3.71%. 23Q4 achieved revenue of 2,593 billion yuan in a single quarter, down 11.32% year on year; realized net profit to mother of 1,984 billion yuan, up 3.60% year on year, basically in line with expectations.
By business, securities business/financial e-commerce services/financial data services/advertising services achieved total revenue of 71.94/36.25/1.98/0.64 billion yuan respectively, or -8.44%/-16.20%/-13.16% -14.67%, respectively. Investment income+profit and loss from changes in fair value (not included in total operating income) of 2,236 billion yuan, +100.31% year-on-year. By entity, the subsidiaries Dongfang Wealth Securities and Tiantian Fund contributed 8.609 billion yuan/3.637 billion yuan in revenue and 5.457 billion yuan/208 million yuan in net profit respectively.
Affected by stock market activity, the company's securities business declined, but its market share bucked the trend, demonstrating the resilience of leading companies. In the securities business, net income from brokerage business was 4.291 billion yuan, and net interest income was 2,227 billion yuan, down 10.4% and 8.70%, respectively.
The company's share-based trading volume was $19.27 trillion, a slight increase of 0.16% over the previous year, and the average transaction commission rate fell slightly to 0.0223%. For the full year of 2023, the stock base trading volume of A Shares+Hong Kong Stock Connect was about 430.68 trillion yuan, down 7.1% year on year. The decline in stock market transaction activity was the main reason for the decline in the company's securities business revenue, but in terms of market share share ratio, the share base share share share share share ratio of the company's brokerage business increased from 4.15% to 4.47%; the market share ratio of financing and securities lending balance increased from 2.31% to 2.72%.
The capital market is volatile, and fund sales are not as good as before, but there is no need to be overly pessimistic. Revenue from financial e-commerce (mainly fund sales) was 3.625 billion yuan, down 16.2% year on year. By the end of the period, Tiantian Fund's non-monetary market public fund holdings were 549.6 billion yuan, down 13.5% and 6.0% year on year, respectively; fund sales were 1547.9 billion yuan, down 23.1% year on year, of which Active Treasury subscription amount was 639.4 billion yuan and other subscription amount was 908.5 billion yuan. The average number of daily active users of Tiantian Fund is about 1.477 million, down from last year. Although the fund sales situation is not as good as the level of 2021 to 2022, compared with before 2021, both sales and holding scale are significantly higher (in 2020, the company's non-inventory holdings were 357.3 billion yuan, fund subscription amount was 1297.8 billion yuan), reflecting that Dongcai's customer stickiness as the industry leader is still strong, and its performance resilience is fair.
Steady returns from proprietary investment surpassed expectations. The company's own investment achieved a net income of 2,236 billion yuan, an increase of 100.2% over the previous year, mainly due to the rise in the fixed income asset market. By the end of the period, Dongfang Wealth had a total of 68.289 billion yuan in transactional financial assets, of which about 50.54 billion yuan were bonds, bank financial management, and structured deposits (accounting for 74%). The China Securities Full Debt Index rose 5.15% for the full year of 2023.
AI will be deployed during the year, and the expectation of improving quality and efficiency will open up a new growth curve. In January 2024, the “Wonderful” financial model independently developed by the company officially began closed testing. With its data characteristics and algorithm advantages, the “Wonderful” financial model focuses on the continuous optimization of financial vertical capabilities in core financial scenarios, and is being integrated into the company's product ecosystem in an orderly manner. During the reporting period, Miaoxiang Big Model was awarded “Best Practice Case” in the Big Model Case Selection organized by the Chinese Academy of Information and Communications Technology, and became the first batch and only financial industry partner in the “Fangsheng” Big Model Evaluation System of the China Academy of Information and Communications Technology. Profit forecasts and investment suggestions: Considering that investment-side reforms promoted by the regulatory authorities in 2024 may involve further channel side fee reduction measures, we tend to think that the average commission rate of the company's fund business will be under some pressure, but given the overall recovery of the market, fund holdings, sales volume, and balance of the two financing funds will rise. The company's own investment is also expected to maintain a steady investment style as always, thus contributing to a growth trend higher than the growth rate of total operating income. Therefore, we predict that from 2024 to 2026, Dongfang Wealth's operating income will be 10.591 billion yuan, 12.541 billion yuan, and 14.768 billion yuan, respectively, and net profit to mother will be 8.524 billion yuan, 9.760 billion yuan, and 11.660 billion yuan respectively. As of 2024/3/15, the corresponding PE valuations will be 25.41x, 22.19x, and 18.58x, respectively, maintaining the “buy” rating.
Risk analysis
The risk that industries and businesses will be affected by fluctuations in capital market sentiment. The one-stop Internet wealth management service provided by the company is highly correlated with the prosperity of the capital market. Once capital market prosperity declines, market activity and investor enthusiasm will be directly affected, which may inhibit investors' market demand for Internet wealth management services, which in turn affects the profitability of the company's overall business.
The risk of further intensification of competition in the industry. In view of the broad development prospects of the industry, the further improvement and opening up of domestic capital markets and the introduction of related policies, there will be more and more participants in the industry, the degree of marketization of relevant rates will be higher and higher, industry competition will be further intensified, and enterprises lacking competitiveness and core advantages will be eliminated from the market. If the company cannot keep up with the development situation of the industry and enhance the company's competitiveness and core advantages, it may not be able to adapt to fierce industry competition.
Risks relating to the safe operation of Internet information transmission and transaction systems. The continuous operation of the company's business model and the effective implementation of the profit model depend on the safe operation of the company's Internet information transmission and transaction system. If there is a problem with the safe operation of the Internet system, it may cause the company's website and app products to not be accessed properly, and some users cannot use them properly, thereby reducing user experience and satisfaction, and even adversely affecting the company's brand image.