Introduction to this report:
The slowing pace of market IPOs and refinancing has put pressure on performance; the company is continuously improving its professional capabilities in various businesses around functionality, and has a leading risk control compliance system, and is more likely to benefit from supply-side reforms in the industry centered around functionality.
Summary:
Maintain the “Overweight” rating and maintain the target price of HK$19.85, corresponding to 13.51xPe and 0.93xPb in 2024. The company's 2023 revenue/net profit to mother was 229.90/6.156 billion yuan, -11.87%/-18.97% YoY; the weighted average ROE was -2.45pct year-on-year to 6.43%, and the performance was slightly lower than expected. Based on the company's latest business situation and current market environment, the profit forecast was slightly lowered to 2024-2025 EPS 1.33/1.50 yuan (1.55/ 1.89 yuan before adjustment), giving the 26th EPS forecast of 1.63 yuan. Considering that the company continues to improve its professional capabilities in various businesses around functionality, it is expected to seize policy opportunities and maintain a target price of HK$19.85, corresponding to 13.51xPe and 0.93xPb in 2024, maintaining an “gain” rating.
Affected by the slowdown in the pace of market IPOs and refinancing, the company's net income from the investment banking business fell sharply year on year, putting pressure on performance, and the year-on-year increase in exchange gains and losses mitigated the decline in performance. 1) Affected by the market environment in 2023, the investment banking business was -47.16% to 3.702 billion yuan, accounting for -106.64% of the adjusted revenue increase, which dragged down performance; the poor performance of the investment banking business was mainly due to the decline in equity financing in the entire market. The scale of A-share IPO financing in 2023 was -31.27% to 359 billion yuan, and refinancing was -37.56% to 5275 billion yuan. 2) Exchange earnings in 2023 were +300.01% year-on-year to RMB 1,361 billion, accounting for a 32.94% increase in adjusted revenue, mitigating the decline in performance, mainly due to changes in profit and loss caused by exchange rate fluctuations in the foreign exchange derivatives business carried out to hedge against foreign currency exposure.
The company focuses on functionality, continuously improves its professional capabilities in various businesses, and has a leading risk control compliance system. It is expected to benefit from supply-side industry reforms promoted around functionality and achieve growth exceeding expectations. It is expected that supply-side reforms in the securities industry will continue to advance, and leading brokerage firms will improve and become stronger through mergers, acquisitions, restructuring, and organizational innovation. The company focuses on functionality, continuously improves professional capabilities in various businesses, innovates fixed income products in the investment banking business, and continuously improves merger and acquisition service capabilities; the wealth management business continues to improve asset allocation and investment service capabilities. Furthermore, the company has a leading risk control compliance system, which will benefit from supply-side industry reforms centered around functionality and achieve development beyond expectations.
Catalyst: The company's ability to specialize in various businesses continues to improve.
Risk warning: The equity market fluctuates greatly.