Key points of investment
Performance Overview
In 2023, China CITIC Securities achieved operating income of 60.07 billion yuan, down 7.8% year on year; net profit to mother was 19.72 billion yuan, down 7.5% year on year. Overall performance was in line with expectations; the weighted average return on net assets was 7.81%, a decrease of 0.86 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 -8%/-27%/-10%/-31%/24%, respectively, accounting for 17%/10%/16%/7%/36% of total revenue, respectively.
Revenue from the dropshipping business bucked the trend
In 2023, China CITIC Securities achieved net brokerage revenue of 10.22 billion yuan, a year-on-year decrease of 8%. The decline was narrower than in the previous three quarters. In terms of purchasing on behalf of someone else, net revenue fell 12% year over year. In terms of wealth management, the company's consignment business performed well in 2023, and revenue bucked the trend by 1%. As of the end of 23Q4, CITIC Securities had a holding volume of 146.9 billion yuan in shares and mixed public funds, ranking 8th, up one place from the end of 23Q3. By the end of 2023, the asset size of custodian clients remained at the level of 10 trillion dollars, the number of overseas high-net-worth customers increased, and sales revenue of wealth management products doubled year-on-year. Looking forward to the future, the average daily stock base turnover increased year-on-year in February and March 2024, and market activity is on the rise, which helps the company to take advantage of purchasing and selling on behalf of others.
The trend of investment banks' revenue under pressure is showing
In 2023, China CITIC Securities achieved net income from the investment banking business of 6.29 billion yuan, a decrease of 27% year-on-year, and the decline increased compared to the previous three quarters. In 2023, the company's domestic equity and debt underwriting scale was 2,779/1910 billion yuan respectively, with a market share of 24.5%/14.1%, ranking first in the industry. Looking ahead, as of March 15, 2024, CITIC Securities's equity underwriting scale (wind caliber) fell 89% year on year. It is expected that due to the contraction in the scale of equity underwriting, the investment banking business will be under relatively high pressure throughout the year, especially in the first half of the year.
Public offering performance is superior to brokers' asset management
In 2023, China CITIC Securities achieved net revenue of 9.85 billion yuan from asset management business, a year-on-year decrease of 10%. In terms of public funds, net revenue fell 3% year on year. According to Wind data, as of the end of 2023, Huaxia Fund's public fund management scale was 1,314.9 billion yuan, ranking second in the industry. In terms of brokerage asset management, net revenue fell 29% year on year, mainly because the management scale continued to decline 18% from the end of 2022 to 1,388.5 billion yuan.
Profit forecasting and valuation
In the face of tightening IPOs and refinancing and strictly controlling the entry points of listed companies, it is expected that the company's investment banking business revenue will be under some pressure, but other businesses will maintain steady growth. The net profit growth rate for 2024-2026 is expected to be 6%/12%/12%, corresponding to BPS of 19.20/20.31/21.55 yuan per share. The company was given 1.5 times PB in 2024, corresponding to a target price of 28.80 yuan, maintaining a “buy” rating.
Risk warning
The macroeconomy declined sharply; trading activity declined sharply; the progress of market reforms fell short of expectations.