Core views:
The company's 2023 performance declined, and the balance sheet quality was further consolidated. In 2023, the company achieved revenue of 17.090 billion yuan, -8.75% year on year; net profit to mother was 2,754 billion yuan, -8.53% year over year. The weighted ROE was 3.45%, a year-on-year decrease of 0.71 pct. The company added long-term stock investment and stock quality impairment. The book value of assets purchased and resold at the end of the year was 5.438 billion yuan, and the impairment preparation was 4.930 billion yuan, accounting for 90%. The low base effect is expected to create performance elasticity in 2024.
Capital market performance affected the profitability of pan-wealth management, and capital intermediation business picked up slightly. (1) In 2023, China Eastern Securities Asset Management achieved revenue of 2,062 billion yuan and net profit of 491 million yuan, a year-on-year decrease of 40.7%; the joint venture Huitianfu Fund achieved revenue of 5.371 billion yuan and net profit of 1,415 billion yuan, or -32.4% year-on-year. (2) Brokerage revenue was 2.78 billion yuan, -9.9% year-on-year. The total number of financial accounts of the company's customers was +10.3% year-on-year; the buyer investment and high-net-worth customer base made steady progress, and the scale of financial products sold on consignment was +13%, and the structure was further optimized. (3) Net income from capital intermediaries in 2023 was $519 million, +6.5% year over year, of which interest income from financing was 1,144 million yuan, down 7.5% year on year; due to disposal proceeds, interest income from purchases and resale was 490 million yuan, +238% year over year.
Investment banking revenue is under pressure, proprietary business is picking up, and OTC business is improving significantly. (1) In 2023, Oriental Investment Bank's business revenue was 1.51 billion yuan, -12.9% year on year, and equity underwriting was 12.930 billion yuan, -45% year over year. The market share of IPOs increased to 1.9%, bond underwriting scale +14% year over year, overseas group collaboration deepened, and total underwriting of TSE increased 77% year over year. (2) Proprietary business +19% year-on-year in 2023. The volume of OTC options transactions was RMB 120,660 million, up 16.8% year on year; the revenue swap transaction volume was RMB 43.951 billion, up 134.30% year on year.
Profit prediction and investment advice: The resilience of the wealth management business is prominent, and the construction of first-class investment banks and investment institutions guides the high-quality development of industry institutions. As the market sentiment improves in 2024, the large asset management industry is expected to reverse, and Orient Securities is particularly beneficial. Referring to peers and the company's PB pivot in the past five years, a valuation of 1.2xPb in 2024 was given. The reasonable value of corresponding A shares was 11.37 yuan/share. According to the A/H share premium, the corresponding reasonable value of H shares was HK$4.30 per share, all maintaining a “buy” rating. (HKD/CNY=0.92)
Risk warning: Large market fluctuations, policy changes, increased business competition, increased credit risk, etc.