Description of the event

The company released its 2023 annual report. During the reporting period, it achieved operating income of 7.119 billion yuan, a year-on-year decrease of 8.46%, and net profit to mother of 2.152 billion yuan, +0.21% year-on-year. The weighted average ROE was 4.88%, a decrease of 0.21pct from the previous year.

Incident reviews

Proprietary performance was outstanding, and balance sheet was optimized. In 2023, the company's own business achieved revenue of 1.705 billion yuan, an increase of 53.54% over the previous year. The rest of the business declined. The investment banking business declined significantly, with a year-on-year decline of 60.38% to 211 million yuan, mainly affected by the slowing pace of issuance in the primary market; the brokerage business was still the company's largest revenue contributor, and the brokerage business achieved revenue of 3.274 billion yuan, a year-on-year decrease of 9.06%. Net income from asset management operations and interest declined by 23.15% and 19.61%, respectively.

During the reporting period, the company's financing costs were reduced and the asset scale expanded steadily. The company's comprehensive financing cost was reduced to a record low of 3.13%, the financial leverage ratio increased to 3.69, an increase of 26%, and the total asset size increased by 22.48%.

Benefits of scale together drive growth in return on investment. During the reporting period, the company aimed to “expand scale, increase profits, and build new advantages”. At the end of the year, the company invested 105.796 billion yuan in proprietary assets, an increase of 39.92% over the previous year. The main purpose is to expand the scale of fixed income investments and reduce the size of equity assets. The fixed income investment achieved revenue of 1,308 billion yuan, an increase of 19.02% over the previous year, and the yield reached 11.39%. The company's fund market making remained at the forefront of the industry. The number of market transactions reached 600, an increase of 20.48% over the previous year. Equity investments were scaled down, and small losses were achieved throughout the year.

Consignment sales bucked the trend, and wealth transformation progressed steadily. The average daily share base transaction volume in the secondary market in 2023 was 0.99 trillion yuan, a year-on-year decrease of 3.10%. The company's purchasing revenue was affected by the decline in transactions. It achieved annual revenue of 2,893 billion yuan, a year-on-year decrease of 8.52%. The number of customers increased by 1.24 million, and the total number of customers exceeded 16 million. The seat rental business revenue was 301 million yuan, a year-on-year decrease of 20.79%. Sales of financial products were boosted, and the scale of consignment sales increased. At the end of the report, the mixed scale of public equity was 22.914 billion yuan, an increase of 2.54% over the previous year, and achieved net revenue of 250 million yuan for the whole year, an increase of 6.56% over the previous year. Interest income from the two loans increased by 7%, but expenses increased, mainly due to interest expenses on bonds. Net interest income declined, but the share of the two finance loans increased. The company's balance of the two loans was 30.9 billion yuan, and the market share was 1.87%.

The scale of fund business grew, and the scale of asset management declined. The net revenue from the company's fund management business was 299 million yuan, an increase of 5.17% over the previous year. The company carried out public offering business through Fangzheng Fubon Fund, and the management scale reached 16.354 billion yuan during the year, an increase of 41.32% over the previous year. The scale of brokerage asset management declined due to factors such as the contraction of bank outsourcing, the expiration of fiduciary business, and the market environment. The amount of AUM entrusted during the year was 57.608 billion yuan, a decrease of 18.95% over the previous year.

Investment advice

The company's shareholder dispute has settled, the shareholding structure is clear, and the majority shareholder background is strong, and it has entered a new stage of development. The company is expected to achieve revenue of 8.868 billion yuan, 9.845 billion yuan, and 10.832 billion yuan respectively from 2024 to 2026. Net profit attributable to mother was RMB 2,726 billion, RMB 3,073 billion, and RMB 3.358 billion, up 26.67%, 12.71%, and 9.28%; PB was 1.41/1.36/1.31, respectively, maintaining the “Increase in holdings - A” rating.

Risk warning

The risk of large fluctuations in the financial market may lead to a sharp drop in the price of financial assets, a decrease in the fair value of financial assets held by the company, and at the same time, directional investment may cause losses due to fluctuations.

Business progress falls short of expected risks. Under the trend of high-quality development in the securities industry, ability to practice and quality of practice have become important influencing factors in business promotion. Facing strict industry supervision, the company's business progress may slow down, thereby affecting the company's performance.

There is a risk of major risky events. Securities companies have various risks such as liquidity risk, market risk, credit risk, operational risk, and reputation risk during the operation process. After the risk occurs, it may have a huge impact on the company's performance.