Event: On March 27, Everbright Securities released its 2023 Annual Report. Net profit of 4.27 billion yuan/yoy +34% was achieved in 2023, loss of 90 million/yoy +60% /qoq -104% in a single quarter; non-net profit of 1.87 billion yuan/yoy -36% was deducted for the whole year. 2023 revenue of 10.03 billion yuan/yoy -7%, 4Q single quarter revenue of 2.28 billion yuan/yoy +23%. The weighted average ROE for 2023 was 6.91% /yoy+1.64pct.
Revenue from the main securities business remained basically the same year on year; non-recurring profit and loss increased annual performance. The main revenue of the company's securities in '23 was 9.30 billion/yoy -2%. 1) Main revenue split: brokerage, investment banking, asset management, net interest, and net investment achieved revenue of 27.7, 10.1, 18.0, and 25.01 billion, respectively, -16%, -20%, -33%, -14%, and +129%, respectively; 2) Looking at the main revenue structure: brokerage accounts for 30%, investment banks account for 11%, asset management accounts for 11%, net interest accounts for 19%, and net investment accounts for 27%. 3) In terms of private equity investment, the subsidiary Everbright Capital continued to promote business rectification regulations, achieving net profit of 2.14 billion yuan in 23 years (mainly due to the basic end of the MPS project incident, which led to non-recurring profit and loss of 2.13 billion yuan due to the signing of an execution settlement agreement); the subsidiary Everbright Development achieved net profit of 260 million yuan/year-on-year loss.
Depreciation dragged down 4Q net profit. The net loss for the 4Q quarter was $90 million, mainly due to deductions of 460 million yuan for the quarter compared to 80 million in the same period last year; impairment of dividends receivable and impairment of goodwill for the whole year was 110 million and 320 million, respectively.
Investment business: The fixed income business drives the increase in return on investment. At the end of 2023, the company's total assets were 259.6 billion yuan/yoy +0.5%, net assets 67.1 billion yuan/yoy +5%, and operating leverage of 3.04x/yoy+0.08x. In terms of investment business, the company's financial investment scale at the end of '23 was 123.8 billion yuan/yoy +2%; the company further improved its fixed-income self-operated layout. Its holdings were mainly high-grade high-quality credit bonds and took the opportunity to increase its holdings of interest rate bonds. The fixed income self-operating performance improved markedly year-on-year, and the return on investment for 23 was estimated at 2.05% /yoy+1.0pct.
The transformation of wealth management deepened and became more realistic, and the scale of consignment products grew against the market. In terms of securities brokerage business:
In 2023, the company's net revenue from the purchasing business was 2.01 billion yuan/yoy -17%, the revenue from the consignment business was 340 million/yoy -9%, and the sales scale of financial products was 33.4 billion yuan/yoy +26%. In terms of wealth management transformation: The influence of the company's two major investment service brands, Jinyangguang Investment and Jinyangguang Manager, continued to increase during the reporting period. At the end of 23, the assets of customers who signed up for the company's securities investment business were 50.4 billion yuan/+35% compared to the beginning of the year. In terms of futures brokerage business: The net revenue of the company's futures brokerage business in '23 was 410 million/yoy -14%, trading volume market share 1.79% /yoy-0.44pct; the average daily customer margin for the whole year was 34.3 billion/yoy +14.2%.
Under the trend of industry fee reduction, major asset management businesses are under pressure, and asset management alone is promoting the transformation of public funding in an orderly manner. Looking at performance, 1) Guangzheng Asset Management (wholly-owned subsidiary): Achieved revenue of 770 million/yoy -27% and net profit of 290 million/yoy -37% in 2023; Guangzheng Asset Management is actively applying for a public equity manager license to advance preparations for the transformation of public funding in an orderly manner. 2) Everbright Prudential (55% shareholding): Achieved revenue of 490 million/yoy -7% and net profit of 90,000,000/yoy -15% in 2023. 3) Dacheng Fund (holding 25% shares): Achieved revenue of 2.01 billion yuan/yoy +6% and net profit of 410 million/yoy -3% in '23. The large asset management business contributed a total profit of 440 million /yoy-30%. In terms of asset management scale, at the end of 2023, the total trusteeship management scale of Guangzheng Securities Asset Management was 30.3 billion/ -18% compared to the beginning of the year; at the end of 23, Everbright Prudential had a non-cargo base scale of 64 billion dollars/yoy -0.9%, ranking 59th in the industry/down 2 places from the end of '22; Dacheng Fund's non-cargo base size was 179.4 billion/yoy +8%, ranking 26th in the industry/ up 2 places at the end of '22.
Investment business: Under the tightening of the industry, the company's equity underwriting business is clearly under pressure, and the bond underwriting business is growing steadily. In terms of equity underwriting business, the company completed 6 IPO projects in '23, with an underwriting scale of 4.36 billion yuan/yoy -57%, a market share of 1.22% /yoy-0.53 pct, and a refinancing scale of 1.05 billion yuan/yoy -89%.
In terms of bond underwriting business, the underwriting amount of corporate bonds in '23 was 440.8 billion yuan/yoy +26%, and the market share was 3.26% /yoy-0.01pct. In terms of project reserves, the company currently has 14 equity projects in the queue, ranking 17th in the industry (excluding non-registration, termination of registration, termination of review, suspension of review).
Investment analysis opinion: Maintain Everbright Securities' “Recommended” rating. The estimated net profit of 24-26E Everbright Securities will be $3.26 billion, $3.27 billion, and $3.48 billion, respectively, or -24%, +0.1%, and +7% year-on-year. The current closing price corresponds to 24-26E dynamic PB of 1.24 times, 1.20 times, and 1.16 times.
Risk warning: The downward pressure on the economy increased; the stock market fell sharply; capital market reforms fell short of expectations.