Incidents:
On March 27, Orient Securities announced its 2023 annual financial report. In '23, the company achieved revenue of 17.09 billion yuan, a year-on-year decrease of 8.75 percent; net profit to mother of 2.75 billion yuan, a year-on-year decrease of 8.53%; weighted average ROE of 3.45%, a decrease of 0.71 pct over the same period last year; and basic earnings per share of 0.30 yuan/share.
Comment:
The company's revenue and profit declined year over year in '23. The company achieved revenue of 17.09 billion yuan in 23, -8.75% year on year; 23Q4 single quarter revenue of 3.4 billion yuan, -49.3% year on year, and -32.1% quarter over quarter. In '23, the company's net profit to mother was 2.75 billion yuan, -8.53% year over year; 23Q4 single quarter net profit was 100 million yuan, -110.3% YoY, and -110.8% quarter-on-quarter. In '23, the company's self-operation/broker/investment banking/asset management/credit accounted for 17.4%/16.3%/8.8%/11.9%/10.3% of total revenue, respectively, +3.7/-0.2/-0.4/-2.3/+1.6pct, respectively. The revenue structure changed slightly compared to the same period last year. Affected by market sentiment in '23, the company's operating performance declined.
Brokerage revenue continued to be under pressure, and net interest income increased slightly. The average daily trading volume of the stock base in '23 was 991.7 billion yuan, -3.1% year on year; the financing balance of the two markets was 1.65 trillion yuan, +7.2% year over year. The company's net brokerage fee revenue in '23 was 2.78 billion yuan, -9.8% YoY; 23Q4 single quarter net brokerage fee revenue was 620 million, -19.1% YoY, and -9.5% quarter-on-quarter, mainly affected by the decline in A-share market trading. The company's net interest income in '23 was 1.76 billion yuan, +7.6% year on year; net interest income in a single quarter of 23Q4 was -11.4% year over year to $440 million, and +31.4% quarter over quarter, which was driven by an increase in interest income from the stock pledge repurchase business. The company continues to promote the transformation of the wealth management business to a “buyer's investment” model, which is expected to increase revenue in the wealth management sector.
Net income from the investment banking business declined by -12.9% year-on-year. The number of A-share market IPOs and capital raised in 23 was 313 companies and 356.544 billion respectively, -26.9%/-39.2% year-on-year, respectively. In '23, the company's investment banking business raised 6.83 billion dollars and a market share of 1.9%. The net revenue of the company's investment bank in '23 was -12.9% year-on-year to 1.51 billion, and the net revenue of investment banks in the 23Q4 quarter was 320 million, -11.0% year-on-year, and -29.3% quarter-on-quarter. It was mainly due to the decline in the company's investment bank revenue due to stricter market supervision of IPOs and refinancing markets. The company's investment banking business is expected to benefit from performance recovery brought about by the registration system reform.
The investment business contributed to performance, and the return on investment was +15.8% year-on-year. The company's investment income (including fair value) in '23 was $2.97 billion, +15.8% YoY; 23Q4 investment income (including fair value) was $0.7 billion, -89.3% YoY, -93.1% quarter-on-quarter. Investment income (including fair value) increased year-on-year in '23, mainly due to changes in fair value of financial assets resulting from changes in the fair value of financial assets for the current period. By the end of '23, the company's asset management scale was 235.75 billion, of which the public fund management scale was $183.38 billion, a slight decrease from the same period last year. The net revenue from the company's asset management business in '23 was 2.03 billion yuan, -23.3% year on year; 23Q4 net asset management revenue in a single quarter was 410 million, -30.3% year over year, and -13.0% quarter over quarter. It is mainly expected to be affected by sluggish market conditions and fund fee reform. The improvement of the company's comprehensive asset management capabilities is expected to enhance asset management business performance.
Investment advice: As a brokerage firm with a high share of asset management revenue, the company was significantly affected by the A-share market. We adjusted the 24-26 net profit forecast to be 31.2 (-44.5%) /32.6 (-47.7%) /35.4 billion yuan, respectively, and EPS was 0.37/0.38/0.42 yuan, respectively. The corresponding PE was 22.5/21.5/19.8 times, maintaining the “increase” rating.
Risk warning: The policy effect falls short of expectations, and the secondary market continues to be sluggish.