Core views:
Overall, 2023 was relatively stable, with increased leverage to maintain table expansion. The company released its 2023 annual report, with 2023 revenue of 60.68 billion yuan, -7.74% year-on-year; net profit to mother of 19.721 billion yuan, -7.49% year-on-year. Net profit for the quarter in Q1/Q2/Q3/Q4 was +3.6%/-1.3%/-4.9%/-30.4% year-on-year, respectively. The weighted ROE for 2023 was 7.81%, a decrease of 0.86pct, and the adjusted leverage ratio was 4.27 times, up 0.34.
Comprehensive advantages and domestic and international collaboration help asset-light businesses highlight resilience. In 2023 ① brokerage business revenue was 10.223 billion yuan, -8% year-on-year. Revenue from consignment financial products was 1,694 billion yuan, +0.63% year over year, accounting for 15% of brokerage business. Sales revenue from overseas wealth management products doubled year on year. ② Asset management revenue of 1,932 billion yuan, -38% year on year; fund business achieved revenue of 7.635 billion yuan, -3% year on year, Huaxia Fund revenue -2% year over year, and net profit of 2,013 billion yuan, or -6.9% year on year.
The asset-heavy business grew steadily, and the investment banking business declined due to countercyclical adjustments. 2023 ① Proprietary investment income was 17.404 billion yuan, +17% year over year. Financial investment assets were +17% year-on-year. Among them, the share of stock investment rebounded to 30.8%, the share of derivative financial assets fell from 5.7% to 4.4%, the OTC derivatives business stabilized, and the margin payable to customers at the end of 2023 was 134.8 billion yuan, -0.05% year-on-year.
② Capital intermediary income was 8.805 billion yuan, +2.67% year over year, of which interest income from securities financing was 8.343 billion yuan, -5.2% year over year; interest income from purchase and resale was 1,762 billion yuan, +15.2% year over year. ③ Investment banking business revenue is under pressure, diversification and domestic and foreign financing services. Investment banking business revenue was 6.293 billion yuan, -27.3% year-on-year, with a market share of 24% of domestic equity underwriting.
Profit forecasting and investment advice. The internal stability of the capital market has improved, leading brokerage firms operate more steadily in a strictly supervised environment, and have benefited more from the process of building first-class investment banks. The company's many businesses rank first in the industry, with outstanding comprehensive advantages and leading international layout. The company's net assets are estimated at $19.23/20.58 per share in 2024-2025. Given the PB pivot of 1.1-2.1 times in the past three years, the reasonable value of A shares is 25 yuan/share, and since the AH premium corresponds to a reasonable value of HK$16.89 per share for H shares, maintaining the “buy” ratings for A and H shares. (HKD/CNY=0.92)
Risk warning. The economic downturn exceeded expectations, industry policy changes, and fluctuations in equity and bond markets caused performance to fall short of expectations, etc.