Matters:
CITIC Securities released its 2023 annual report, achieving operating income of 60.68 billion yuan (YoY -7.7%) and net profit to mother of 19.721 billion yuan (YoY -7.5%). Total assets are 1453.4 billion yuan, and net assets belonging to the parent company are 268.8 billion yuan. EPS (diluted) is 1.33 yuan, BVPS is 17.01 yuan. It is proposed to distribute a cash dividend of 4.75 yuan (before tax) for every 10 shares, corresponding to a dividend payment rate of 35.70%.
Ping An's point of view:
The performance was in line with expectations, and overall resilience was highlighted. Against the backdrop of sluggish investment activity and a slowdown in equity financing in 2023, the company's net profit to mother fell 7.5% year on year, which was relatively steady. Among them, the 23Q4 revenue for the single quarter was 14.3 billion yuan (QoQ -0.3%), which was basically flat from month to month, with net profit of 3.3 billion yuan (QoQ -35%), which is expected to affect the concentrated release of expenses at the end of the year. By business, broker/investment banking/asset management/interest/ownership/other net income was -8%/-27%/-10%/+24%/-28%, respectively, accounting for 17%/10%/16%/7%/36%/13%, respectively. The large decline in other business revenue was mainly due to the impact of commodity sales. After removing other business revenue, the five major businesses had revenue of 52.24 billion yuan (YoY -3.6%), supporting steady revenue growth in proprietary businesses. The cost side remained stable, with a net profit margin of 32.8% (YOY+0.1pct). At the end of 2023, the leverage ratio was 4.35 times (YoY+0.3 times), and the full year ROE was 7.6% (YoY -1.7%).
Proprietary businesses have stabilized the basic performance market. At the end of 2023, the scale of self-employment was 717 billion yuan (YoY +18%). The overall performance of equity investment was better than last year, and the estimated return on proprietary investment was 3.05% (YoY+0.15pct).
However, the net stable funding ratio at the end of 2023 was 124.86% (YOY-4.6pct), which is quite tight. According to the company's annual report and market balance estimates disclosed by Wind, the market share of the two finance business at the end of 2023 was 7.0% (YoY+0.2pct), which was a steady increase, but the increase in interest expenses dragged down the net interest income performance.
Institutional brokerage and product sales have remained steady. In 2023, the company's net income from brokerage trading securities was 5.9 billion yuan (YoY -17%), a year-on-year decline higher than the market share base turnover. The institutional brokerage and financial products business performed steadily and continued to lead, with net revenue from trading seat leasing of 1.5 billion yuan (YoY +14%) and financial product sales revenue of 1.7 billion yuan (YoY +0.6%), achieving positive growth against the market. At the end of 2023, non-monetary public fund holdings were worth 19.2 billion yuan (YoY +10%), and the asset size of custodial clients remained at the level of 10 trillion yuan, an increase of 4% over the previous year. The reduction in the scale of brokerage asset management affected asset management revenue. At the end of 2023, the scale of brokerage asset management was 1388.5 billion yuan (YoY -18%). According to annual reports, the private equity asset management business had a market share of 13.71% (YOY-2.42pct), but it still remained number one in the industry. The subsidiary Huaxia Fund had a total management scale of 1.8 trillion yuan (YoY +6%), net profit of 2 billion yuan (YoY -7%), and profit contribution remained stable.
The investment banking business is under pressure, but the scale of underwriting still ranks first in the industry. According to Wind's listing statistics, the company's IPO underwriting scale in 2023 was 50 billion yuan (YoY -67%), of which the 23Q4 IPO underwriting amount was only 600 million yuan; the refinancing underwriting scale was driven by strong 23Q1 performance, and the annual refinancing (allotment+issuance) underwriting scale was 195.6 billion yuan (YoY +19%); and the bond underwriting scale was 1.86 trillion yuan (YoY +23%). The growth rate was basically the same as that of the industry. Although the slowdown in IPOs has dragged down the company's investment banking revenue performance, the scale of the company's IPOs, refinancing, and bond underwriting remains the largest in the industry, and its leading edge is still remarkable. The company's annual investment banking revenue was 6.3 billion yuan (YoY -27%), of which the Q4 investment bank revenue was 1 billion yuan (QoQ -28%) in a single quarter.
Investment advice: The company's many leading business advantages continue to expand, and comprehensive service capabilities and professional capabilities raise competitive barriers. Recently, the direction of high-quality development in the securities industry is clear. The Securities Regulatory Commission and other regulators clearly support leading financial institutions to grow bigger and stronger. The company's competitive advantage is expected to further improve, and they are optimistic about the company's long-term growth space. However, considering the sharp fluctuations in the equity market in 2024Q1, the countercyclical adjustment policy for equity financing continued. The company's net profit forecast for 24/25 was lowered to 203/22.3 billion yuan (the original forecast was 221/24.3 billion yuan), and an additional 26-year net profit forecast of 23.8 billion yuan was added, corresponding to a year-on-year change of +3%/+10%/+7%. The company's current stock price corresponds to about 1.14 times the 2024 PB, maintaining a “recommended” rating.
Risk warning: 1) The progress of capital market reforms fell short of expectations; 2) monetary policy tightened beyond expectations; 3) The decline in macroeconomic growth exceeding expectations affects market risk appetite.