Key points of investment
Performance Overview
In 2023, China Finance achieved operating income of 22.99 billion yuan, down 11.87% year on year; net profit to mother of 6.16 billion yuan, down 18.97% year on year; weighted average return on net assets of 6.43%, down 2.45 pct year on year.
Net profit for 23Q4 was 1.55 billion yuan, down 2% year on year and up 48% month on month. By business line, the year-on-year growth rates of brokerage, investment banking, asset management, interest, and investment net income were -13%/-47%/-11% /NA/ 0%, respectively, accounting for 20%/16%/5%/-6%/46% of total revenue, respectively.
Increase in dropshipping revenue
In 2023, China Finance achieved net brokerage revenue of 4.53 billion, a year-on-year decline of 13%. Wealth management transformation continued to deepen. At the end of 2023, the total number of the company's wealth management customers was 6.8038 million, up 17% year on year; total customer account assets were 2.88 trillion yuan, up 4.3% year on year; the scale of product ownership in the wealth management business was about 350 billion yuan, and the scale of the scale was growing for four consecutive years; at the end of 23Q4, the size of CCC Wealth's escrow funds was 408/55.1 billion yuan respectively. In a difficult market environment, the holding scale of most consignment agencies declined, while the holding scale of CCC Wealth's escrow increased 15%/24% year on year. Compared with an increase of 1%/5%, the company's revenue from financial products sold on consignment still achieved a positive growth of 3%.
Investment bank revenue continues to decline
In 2023, China Finance achieved net investment banking revenue of 3.72 billion yuan, a year-on-year decrease of 47%, which is greater than that of comparable companies. In 2023, the company's domestic IPO and refinancing underwriting amount was 322/49.3 billion yuan, ranking 4/3 in the market, with year-on-year growth rates of -39%/-61%, respectively. The company's domestic bond underwriting scale was 1,1595 billion yuan, an increase of 26% over the previous year, ranking 4th in the industry. Looking forward to the future, as of March 15, 2024, CICC's equity underwriting scale (wind caliber) decreased 88% year over year, and equity revenue contributed significantly to the company's underwriting and sponsorship revenue. Therefore, under the tightening of IPOs and refinancing, investment bank revenue may continue to decline significantly.
CICC International's performance increased
In 2023, China Finance International's revenue and net profit increased 24%/17% year over year, respectively. In terms of performance in specific fields, the company underwrote the Hong Kong stock IPO of US$1,218 billion in 2023, ranking first in the market; the overseas bond underwriting scale of Chinese enterprises ranked first among Chinese brokerage firms for three consecutive years; Hong Kong stocks continued to lead the market share among Chinese brokerage firms. The company's overseas business continues to enrich its customer structure and product range, and its international competitiveness is further enhanced.
Profit forecasting and valuation
CICC's net profit improved significantly month-on-month in 23Q4. The annual profit decline narrowed, and the international business performance was impressive.
The net profit growth rate for 2024-2026 is expected to be 4%/14%/9%, corresponding to BPS of 22.46/23.36/24.35 yuan. The company was given 0.6 times PB in 2024, corresponding to a target price of HK$14.59 (exchange rate HKDCNY0.92), maintaining a “buy” rating.
Risk warning
Macroeconomics declined sharply; market trading activity declined sharply; the progress of market reforms fell short of expectations.