Profit declined year-on-year, and dividend ratio increased
The company's revenue in 2023 was 17.090 billion yuan, -8.75%; net profit to mother was 2,754 billion yuan, -8.53%; 23Q4 net profit to mother in a single quarter was -100 million yuan, with year-on-year and month-on-month losses. Looking at the whole year, under the low base effect, investment and credit business grew year-on-year, asset management, brokerage and investment bank revenue declined year-on-year, and credit impairment losses increased. The company paid 0.15 yuan per share, with a dividend rate of 46.09%, +4pct year-on-year. We appropriately lowered the company's investment revenue and investment banking business scale. We expect the company's 2024-2026 EPS to be 0.27/0.30/0.32 yuan (the value was 0.54/0.63 yuan before 24-25), the 2024 BPS will be 8.86 yuan, and the A/H comparable company's 2024 PB (Wind's consistent expectation) will be 0.9 and 0.4 times. Considering that the company's asset management advantage continues to lead, the 2024 PB valuation is given 1.2 times and 0.4 times, respectively, corresponding to the target price HK$10.63 and HK$3.85 (previous values were $11.45 and HK$4.71), all maintaining the buy rating.
Investment income rebounded year-on-year, and financial assets expanded
The company's annual investment revenue was 2,388 billion yuan, +26% year-on-year; the balance of proprietary transactions and institutional sales transactions at the end of the period was 154.7 billion yuan, +20.4% year-on-year. In terms of equity proprietary investment, the trading stock business operates at low positions; the high dividend strategy adheres to the long-term value investment concept of moderate timing and selection of individual stocks, and has performed well; actively lays out quantitative investments, and continues to deepen fund analysis and strategy allocation research. The scale of the fixed income proprietary trading business is growing steadily, and the position structure continues to be optimized. Interbank cash trading volume increased 24.9% year on year, exchange bond trading volume increased 177.2% year on year, and interest rate swap volume increased 86.9% year on year. Credit impairment losses plus impairment losses on other assets totaled $1,252 billion, +19% year over year, which affected performance.
Interest income has been growing steadily, while brokerage and investment banks have declined
Net interest income for the year was 1,764 billion yuan, +8% year on year; net income from brokerage business was 2,781 billion yuan, -10% year over year, with a market share of 1.63% from securities brokerage business revenue, ranking 20th in the industry, and the market share ranking was the same as last year. Net revenue from the investment banking business was 1.51 billion yuan, -13% year-on-year, which declined somewhat due to the slowdown in the pace of IPOs and refinancing in the market. It underwrote 7 IPO projects throughout the year, with a total underwriting scale of 6.826 billion yuan; underwriting a total of 8 additional and convertible bond projects, with a lead underwriting scale of 6.104 billion yuan.
Asset management revenue contracted year on year, and depreciation pressure eased somewhat
Asset management revenue was $2,029 billion, -23% year over year. The company's asset management companies Dongzheng Asset Management and Huitianfu lead the way in active management capabilities, and are expected to continue to improve their overall competitiveness. The company continues to implement “risk control and scale reduction” and continuously reduces the scale of the stock pledge business. At the end of the year, the balance of the stock pledge business to be repurchased was 5.899 billion yuan, all funded by own funds, down 35.4% from the previous year. The scale was effectively reduced, and depreciation pressure eased somewhat.
Risk warning: Business development falls short of expectations, risk of market fluctuations, risk of investment banking business supervision.