Key investment points: The company continues to exert wealth management transformation, continuously deepens active management transformation, and drives a continuous increase in the scale of consignment financial products and asset management revenue. The reasonable value range is 5.20-5.68 yuan/share, maintaining the “superior to the market” rating.
[Event] Huaan Securities announced its 2023 annual results: operating income of 3.65 billion yuan, +15.6% year over year; net profit to mother of 1.27 billion yuan, +7.9% year on year; corresponding EPS of 0.27 yuan, ROE 6.2%, +0.3 pct year on year.
The share of corporate broker/investment banking/asset management/interest/proprietary income was 26%/3%/13%/12%/25%, respectively. In the fourth quarter of 2023, we achieved operating income of 9.3 billion yuan, +22.8% YoY, +14.4% month-on-month; net profit to mother was 320 million yuan, +40.5% YoY, +4.3%.
Building service brands such as “Jinji Exchange” and “Private Equity Club”, the revenue from selling financial products on consignment has increased dramatically. In 2023, the company's brokerage revenue was 970 million yuan, -6.0% year-on-year, accounting for 26.4% of revenue. The average daily share-based trading volume of the entire market was 962.5 billion yuan, -4.0% year-on-year. The company's revenue from consignment sales of financial products was 58 million yuan, a year-on-year increase of +112.5%, accounting for 6.0% of brokerage business revenue. The company's two financing balance was 10.4 billion yuan, +15% compared to the beginning of the year, and 0.63% market share, 0.04pct year on year.
Demand for local government bonds and private equity bonds has increased, driving the increase in total bond underwriting. In 2023, the company's investment banking revenue was 110 million yuan, -28.7% year-on-year. The underwriting scale of the equity business was -86.6% year-on-year, and the underwriting scale of the bond business was +38.4% year-on-year. The shareholder underwriting scale was 1.05 billion yuan, ranking 59th. It is the 3 refinancing companies. The principal underwriting scale of bonds was 28 billion yuan, ranking 42nd; among them, the underwriting scale of corporate bonds, financial bonds, and corporate bonds was 12.7 billion yuan, 9.1 billion yuan, and 4.9 billion yuan respectively. There are 2 IPO reserve projects, ranked 42nd, and both are GEM.
The sales scale of consolidated products has increased dramatically, and they are actively applying for asset management subsidiaries. In 2023, the company's asset management revenue was 490 million yuan, +0.7% year-on-year. Active management scale was 607 million yuan, +10.5% year-on-year. The sales scale of the company's consolidated products has increased dramatically, the net value of fixed income products has generally shown an upward trend, and the soft power of market competition has progressed steadily. The company actively prepared to apply for the establishment of an asset management subsidiary, which was approved by the Securities Regulatory Commission in September 2023.
Self-operating performance is good, which promotes the improvement of the company's overall performance. The company's investment income in 2023 (including fair value) was 90 billion yuan, +45.5% year on year; investment income (including fair value) for the fourth quarter of 2023 was 170 million yuan, +81.1% year over year. The company's equity investment adheres to an absolute income orientation. The fixed income business continues to promote the transformation of the FICC investment and research system with “modeling” and “strategization” as the core, expanding the scale of working capital under the premise of stable income and steady leverage, which has played a good role in guaranteeing basic income.
Investment advice: We estimate that the company's 2024/25/26E net profit was 1,361 billion yuan, 1,445 billion yuan, and 1,546 billion yuan, respectively, +7/ +6%/+7% year-on-year, EPS was 0.29, 0.31, 0.33 yuan, and BVPS was 4.73, 4.99, and 5.27 yuan respectively. The company was valued using a comparable company valuation method, and it was given 1.1-1.2xPb in 2024, corresponding to a reasonable value range of 5.20-5.68 yuan/share, maintaining a “superior to the market” rating.
Risk warning: Continued market downturn has led to a decline in business scale, and market supervision has been further strengthened.