Description of the event
CITIC Securities released its 2023 annual report. During the reporting period, it achieved operating income of 60.07 billion yuan, -7.7% YoY, net profit to mother of 19.72 billion yuan, -7.5% YoY, and a weighted average return on net assets of -0.86pct to 7.81% year-on-year.
Incident comments
Profitability is under pressure in weak markets, and proprietary businesses contribute to performance resilience. In 2023, CITIC Securities achieved revenue and net profit to mother of 600.7 billion yuan and 19.72 billion yuan, respectively. The weighted ROE was 7.81%, -0.86pct year on year, and the leverage after excluding customer funds was 4.27x, +7.1% year over year. By business line, brokerage, investment banking, asset management, interest, and proprietary income were 102.2, 62.9, 98.5, 40.3, and 22.49 billion yuan, respectively, -8.5%, -27.3%, -10.0%, -30.6%, and +22.8% year-on-year respectively.
Continue to develop customers and consolidate the foundation of brokerage business. In 2023, the average daily turnover of the domestic stock base was 991.7 billion yuan, -3.1% year on year. The company achieved brokerage revenue of 10.22 billion yuan, -8.5% over the same period last year. The company's brokerage business performance was slightly weaker than the market.
By the end of 2023, the number of the company's individual customers was +9.2% to 14.2 million, and securities transactions were +1.6% year-on-year to 283.8 billion yuan, of which institutional customers accounted for 60.9%, +0.40pct year-on-year.
The market share of the two finance loans has stabilized, and the scale of stock pledges has rebounded. By the end of 2023, the company's balance of two loans was 133.6 billion yuan, +3.4% year on year, estimated market share was 8.1%, -0.3 pct year on year, estimated interest rate 6.2%, +0.4 pct year on year; stock pledge business scale was 39.4 billion yuan, +34.0% year over year, achieving 1.54 billion yuan in stock pledge interest income, +29.1% year over year, and a transfer of 365 million yuan in credit impairment losses in the same period last year.
The IPO underwriting scale declined as the market declined, and the equity refinancing business performed well. The scale of IPOs, equity refinancing, and bond financing in the 2023 market was 0.36, 0.78, and 71.05 trillion yuan respectively, with year-on-year differences of -39.2%, -29.4%, and +15.5%, respectively. The overall domestic equity financing market tightened. The IPOs, refinancing, and bond financing scales of CITIC Securities were 500 billion yuan, 2279 billion yuan, and 1910 billion yuan, respectively. The market shares among brokerage firms were 14.0%, 28.4%, and 14.1%, respectively, and -11.5, +7.8, and -0.6pct, respectively.
The scale of pooled asset management declined markedly, and Huaxia Fund's performance was steady. By the end of 2023, the company's total asset management scale was 1.39 trillion yuan, or -18.0%, of which pooled asset management was -40.9% to 297.7 billion yuan, and the estimated rate was 0.26%, the same as the previous year. The private equity asset management market share was 13.71%, or -2.42pct year on year. At the end of the reporting period, Huaxia Fund's public equity management scale was 1.32 trillion yuan, +15.8% year over year, achieving net profit of 2.01 billion yuan, -6.9% year on year, contributing 4.8% to the parent company's net profit, which was the same as the previous year.
The expansion of proprietary assets is accelerating, and risk control indicators are under further pressure. By the end of 2023, the company's financial assets were +19.1% year-on-year to 715.7 billion yuan, and the company's inventory expansion rate accelerated. The risk control index further approached the warning line. The net stable capital ratio was -4.78pct to 124.86% year over year, close to 120% of the warning line.
As a leading comprehensive brokerage firm, the company has shown strong profitability in weak markets, and is expected to gradually benefit from the improvement of the competitive landscape of the industry under the current trend of continuous tightening of the regulatory environment. The company's net profit for 2024-2025 is estimated to be 22.45 billion yuan and 25.11 billion yuan, respectively, with corresponding PE of 12.9 and 11.6 times, and corresponding PB of 1.00 and 0.92 times, respectively, maintaining the purchase rating.
Risk warning
1. The equity market has been drastically reduced; 2. Regulatory policies have been tightened.