In 2023, China Finance achieved operating income of 23 billion yuan, -12% year on year; net profit to mother was 6.16 billion yuan, -19% year over year. At the end of 2023, total assets were 624.3 billion yuan, -4% year-on-year, and net assets were 104.9 billion yuan, +5% over the previous year; annualized ROE was 6.43%, -2.5 pct.
Overall overview: Net revenue and profit declined year-on-year, and the margins of proprietary investment banks improved in the fourth quarter. In 2023, we achieved revenue of 23 billion yuan, -12% year over year; Q4 single quarter revenue of 5.5 billion yuan, -17% year over year, +10% month on month.
Net profit to mother was 6.16 billion yuan, -19% year over year; Q4 net profit to mother was 1.55 billion yuan in a single quarter, -2% year over year, +48% month on month. At the end of 2023, total assets were 624.3 billion yuan, -4% YoY, and net assets were 104.9 billion yuan, +5% YoY. Annualized ROE 6.43%, -2.45 pct year over year. Operating leverage was 5.24 times, a slight decline from previous years. Proprietary business/brokering/investment banking/asset management/credit/other businesses accounted for 49%/21%/17%/6%/-6%/13%, respectively, +8%/+0.7%/-10%/+0.3%/-2%/+3%, respectively.
Fee business: Continued development of major financial management business, and traditional brokerage and investment banks are under significant pressure. (1) Market downturn is dragging down traditional brokerage business, and wealth management continues to be specialized and digitally transformed. In 2023, brokerage revenue was 4.5 billion yuan, -13% year over year; Q4 was 1 billion yuan in a single quarter, -32% year over year, flat month over month. The decline in revenue for the year was higher than the -3% growth rate in the scale of stock transactions in the market. By category, revenue from agent trading was 3.3 billion yuan, -20% year over year; seat rental revenue was 900 million yuan, -20% year over year; revenue from consignment financial products was 1.3 billion yuan, +3% year over year. The transformation of the company's wealth management continues, with product holdings of 350 billion yuan, growing for four consecutive years. The buyer's investment system has been continuously improved, and the assets of customers who have signed up for innovative personal trading services such as “Stock 50” and “ETF50” have exceeded 240 billion yuan. The total number of financial management clients was approximately 6.8 million, an increase of 17% over the previous year. Furthermore, digital intelligence drives value monetization, with online AUM of nearly 10 billion dollars in 2023, quadrupling from the end of '22. (2) The policy phase has been tightened, which has dragged down the investment business, and the international layout has made up for it. Investment banking revenue in 2023 was 3.7 billion yuan, -47% year over year; Q4 investment banking revenue was 1.1 billion yuan in a single quarter, -54% year over year, 71% month on month.
17 A-share IPOs were underwritten, with an IPO volume of 32.2 billion yuan, -39%, ranking fourth in the market; lead underwriter of the Hong Kong stock IPO project of US$1.2 billion, -66% of the year, ranking first in the market; lead underwriter of 26 A-share refinancing projects, with a refinancing scale of 49.3 billion yuan, with a refinancing scale of -61% year over year, ranking third in the market; led the underwriting of 8 Hong Kong stock refinancing orders, with a refinancing scale of $570 million, +19% year over year. Domestic bond underwriting amount was $1.16 trillion, +26% year over year; overseas bond underwriting amount was US$5.2 billion, +2% year over year. (3) Pooled asset management contracted, dragging down asset management revenue, and the size of public funds continued to increase. Asset management revenue in 2023 was 1.2 billion yuan, -11% year on year; Q4 asset management revenue in a single quarter was 260 million yuan, -17% year over year and -11% month on month. At the end of 2023, the company's pooled asset management was 139.9 billion yuan, -40% year over year; single asset management was 460.2 billion yuan, -11% year over year; special asset management was 172.5 billion yuan, -2% year over year; public fund was 143.4 billion yuan, +25% year over year; and private equity investment fund was 296.8 billion yuan, +13% year over year. CICC Fund's asset management scale was 138.5 billion yuan, +20% over the same period last year.
Capital business: Self-employment is flat, and the two finance businesses are stable. (1) Flexible position adjustments in the second half of the year grasped the structural market, and self-operating income remained the same as previous years. Proprietary revenue in 2023 was 10.56 billion yuan, the same year-on-year; Q4 performance recovered significantly, with revenue of 3.6 billion yuan in a single quarter, 3% year-on-year and 40% month-on-month. At the end of 2023, transactional financial assets were $284.7 billion, +6% year-on-year. Equity investment continued to gain momentum, with OTC derivatives hedging holdings of $122.4 billion at the end of the period, +12% over the same period. Derivative financial products of 12 billion yuan, -33% year-on-year, may be affected by previous derivatives fluctuations. (2) Business leverage increases interest expenses, the two loans are stable, and the scale of pledged repurchases has declined. Net interest income in 2023 - $1.3 billion, 2022 - $1 billion; Q4 single-quarter revenue - $500 million, 2022 - $600 million. The company's net interest income declined due to increased leverage, and the growth rate of interest expenses rose sharply. Total interest expenses in 2023 were 10.7 billion yuan, +17% over the same period last year. In 2023, the amount of financing was 35.8 billion yuan, +13% year over year; at the end of 2022, the company had a balance of 42.4 billion yuan, 3% YoY, a market share of 2.57%, maintaining a guarantee ratio of 262.3%. The amount of financial assets bought and resold was 19.9 billion, -27% year-on-year.
Investment advice: Maintain a “Highly Recommended” rating. The company leads the strategic layout, insists on advancing the “three modernizations and one family” strategy, is rooted in China, integrates the world, embraces the future, and deeply cultivates the region. In terms of institutional business, the company has built a full range of comprehensive financial service capabilities. From early investment to late-stage listing and financing, through in-depth exploration of the diverse needs of different customer groups, the “CICC Solution” can provide professional services throughout the life cycle. In terms of retail business, the company accelerates digital intelligence transformation, embraces AIGC trends, and enhances customer reach and service radius. Looking ahead to the future market, the policy attitude to support the development of the capital market is firm, and market sentiment has clearly recovered, which is beneficial to the brokerage sector. As an industry leader, CICC will benefit first. Considering the peripheral market environment, we lowered the company's net profit from the mother in 24/25/26 to 63.67,71 billion yuan, +2%/+6% over the same period last year. We lowered the company's target price to 40.96 yuan, corresponding to 31.5 times PE in 2024, with a space of about 28%, maintaining a highly recommended rating.
Risk warning: Policies are not as strong as expected, market fluctuations have intensified, and the company's market share has not increased as much as expected.