CICC released its 2023 annual report. The company achieved operating income of 22.99 billion yuan, down 11.87% year on year; realized net profit of 6.156 billion yuan, down 18.97% year on year; corresponding EPS 1.14, down 22% year on year; weighted average return on net assets of 6.43%, down 2.45 pct year on year. The decline in performance was higher than that of peers, and pressure on subsequent investment banks and derivatives businesses is expected to continue.
The pace of IPOs has slowed, debt underwriting is hedging, and overseas business is gaining strength. Affected by the slow pace of IPOs, the company achieved investment banking revenue of 3.702 billion yuan in the same year, a year-on-year decrease of 47.16%. The company's equity financing amount was RMB 90.531 billion, down 53% year on year; the scale of bond financing was RMB 1,159,538 billion, up 26% year on year; and the overseas bond underwriting scale was USD 5.189 billion, up 2.2% year on year. The company's Chinese enterprises ranked second in global equity capital financing, and the Hong Kong stock IPO financing ranking remained number one. The company has 39 IPO reserve projects, ranking fourth in the industry. The investment banking business is linked at home and abroad to help comprehensive financing.
Product ownership has increased significantly, and the buyer's investment transformation has paid off. The company achieved brokerage revenue of 4.530 billion yuan in the same year, a year-on-year decrease of 13.42%; while the scale of wealth business product holdings was about 350 billion yuan, and the scale was growing for four consecutive years. The buyer's investment system has been continuously improved. Through innovative personal trading services such as “Stock 50,” “ETF50,” and “Stock T0,” it has covered more than 200,000 customers and signed customer assets exceeding 240 billion yuan; covering more than 11,000 domestic and foreign institutional investors, QFII's customer market share has ranked first in the market for 20 consecutive years. The company's connectivity transaction share remains at the top of the market; it focuses on expanding customers in emerging markets and “Belt and Road” countries. Overseas products are constantly being enriched, and its cross-border business position is consolidated.
The asset management business is declining, and the investment structure is steady. The company achieved asset management revenue of 1,213 billion yuan, a year-on-year decrease of 11.19%. AUM was about 550 billion yuan, down 21.34% year-on-year. CICC Fund managed AUM of about 140 billion yuan, an increase of 27.420 billion yuan over the end of 2022. The performance was better than that of asset management subsidiaries. In the same year, the company achieved investment business revenue of 10.556 billion yuan, a year-on-year decrease of 0.49%. The company adheres to the direction of de-exposure, seizes the asset allocation window, and increases investment in financial bonds and ABS. The scale of investment continues to grow, but considering the market and regulatory environment, there is downward pressure on the company's OTC derivatives business in the future.
Risk warning: Market decline brings uncertainty to brokerage performance and valuation repair; financial supervision is becoming stricter; market competition is intensifying; innovation is falling short of expectations, etc.
Investment advice: Based on equity market fluctuations and the impact of new regulatory regulations on the securities industry, we lowered the company's profit forecast for 2024 and 2025 by 14.68% and 6.59% respectively. We expect the company's net profit to be 6.9.0/77.2/8.33 billion yuan in 2024-2026, up 12.1%/11.9%/7.9% year-on-year. The PE corresponding to the current stock price is 22.9/20.5/19.0x, and PB is 1.6/1.5/1.4x. As market reforms continue, the company's various business advantages are expected to continue, and the company's comprehensive strength and ROE will continue to improve. We maintain a “buy” rating for the company.