Performance Overview
In 2023, Guolian Securities achieved operating income of 2.96 billion yuan, up 12.7% year on year. Driven by investment in the fourth quarter, the growth rate was slower than in the previous three quarters; net profit to mother was 670 million yuan, down 12.5% year on year, mainly due to the company actively expanding its business and the cost growth rate was higher than the revenue growth rate; the weighted average return on net assets was 3.89%, a decrease of 0.73 pct year on year. By business line, the year-on-year growth rates of brokerage, investment banking, asset management, interest, and investment net income were -6%/2%/129%/-33%/7%, respectively, accounting for 17%/17%/15%/3%/42%/6% of total revenue, respectively.
Wealth management business is growing steadily
In 2023, Guolian Securities achieved net brokerage revenue of 520 million, a year-on-year decrease of 6%. Among them, net revenue from proxy purchases fell 5% year on year, which is basically in line with the trend of the average daily stock base turnover falling 3% year on year in the 2023 market. Revenue from consignment financial products decreased by 22% year on year, and revenue from consignment sales was greatly affected by the downturn in the fund market. In terms of investment, by the end of 2023, the company's total number of fund investment customers was 300,000, an increase of 25% over the previous year, with authorized account assets of 6.6 billion yuan. We expect the company's investment scale to maintain a leading position in the industry.
The combined table helped increase asset management revenue
In 2023, Guolian Securities achieved net revenue of 440 million yuan from asset management business, an increase of 129% over the previous year, mainly due to the combined revenue of the League of Nations Fund. As of the end of 2023, in terms of brokerage asset management, the company's fiduciary capital was 117.3 billion yuan, an increase of 15% over the previous year. The asset management scale of the League of Nations Fund is 148.8 billion yuan, and the management scale of non-monetary public funds is 101.6 billion yuan, ranking 44th in the industry. According to data from the China Galaxy Securities Fund Research Center, the League of Nations has ranked 14th for active stock management capability in the past three years and ranked 22nd for active stock management ability in the past four years, all of which are far higher than the overall scale ranking, showing excellent active management ability.
Investment banking business revenue bucked the trend
In 2023, Guolian Securities achieved net income from the investment banking business of 490 million yuan, an increase of 2% over the previous year. The company's equity and debt underwriting scales were 39.56/51,581 billion yuan respectively, with year-on-year growth rates of -24%/31%, respectively. Looking forward to the future, if the integration of the company and Minsheng Securities is completed, the scale of the investment banking business is expected to increase significantly. Taking the 23H1 data as an example, the net revenue from the investment banking business of Guolian Securities was 281 million yuan, ranking 20th among listed brokerage firms. If the revenue from the investment banking business of Minsheng Securities is added, the ranking will increase from 13 to 7.
Profit forecasting and valuation
Guolian Securities is expected to continue to expand its scale through endogenous growth and epitaxial mergers and acquisitions. The net profit growth rate for 2024-2026 is expected to be 46%/15%/11%, corresponding to BPS of 6.64/7.07/7.54 yuan per share. Maintain the target price of $13.70 and maintain the “buy” rating.
Risk warning
The macroeconomy declined sharply; trading activity declined sharply; the progress of market reforms fell short of expectations.