Incidents:
On March 28, CICC released its 2023 annual financial report. In '23, the company achieved operating income of 22.99 billion yuan, a year-on-year decrease of 11.87%; net profit to mother was 6.16 billion yuan, a year-on-year decrease of 18.97%. The company's weighted average ROE for fiscal year 23 was 6.43%, a year-on-year decrease of 2.45 pct. Basic earnings per share were 1.138 yuan/share.
Comment:
The company's revenue and profit declined significantly year-on-year in '23. In '23, the company achieved revenue of 22.99 billion yuan, -11.9%; 23Q4 single-quarter revenue of 5.52 billion yuan, -17.5% year-on-year, +9.5% quarter-on-quarter; net profit to mother of 6.16 billion yuan, -19.0% year-on-year; 23Q4 net profit of 1.55 billion yuan, -2.3% year-on-year, and +47.9% quarter-on-quarter.
The company's self-operated/brokering/investment banking/asset management business accounted for 46.1%/19.7%/16.1%/5.3% of total revenue, respectively, and +5.4/-10.8/0pct year-on-year, respectively. The revenue structure changed slightly compared to the same period last year. The self-operated business contributed to revenue growth, and the brokerage business declined in 23 due to market sentiment.
Brokerage business revenue declined year on year, and credit business continued to be under pressure. The average daily trading volume of the stock base in '23 was 991.7 billion yuan, -3.1% year on year; the financing balance between the two markets was 1.65 trillion yuan, +7.2% year over year. The company's net brokerage fee revenue in '23 was 4.53 billion yuan, -13.4% year-on-year; net brokerage fee revenue for the 23Q4 quarter was 1.02 billion yuan, -32.5% year-on-year, mainly due to the decline in performance due to shrinking trading volume in the A-share market. The company's net interest expenditure in '23 was $1.33 billion, +30.5% year on year; in 23Q4, net interest expenditure was -20.7% YoY to $510 million. Net interest income was negative due to the continuous increase in interest expenses in the credit business in the year. The company continues to implement the customer-centered wealth management allocation concept, which is expected to increase the revenue of the wealth management business.
Net revenue from the investment banking business fell 47.2% year on year, and the performance fell short of expectations. The number of IPOs and capital raised in the A-share market in '23 was 313, or 356.544 billion yuan, respectively, or -26.9%/-39.2% year-on-year. In '23, the company's investment banking business underwrote 17 A-share IPOs, amounting to 32.25 billion yuan, with a market share of 9%, ranking fourth in the market. The net revenue of the company's investment bank in '23 was -47.2% to 3.70 billion yuan, and the net revenue of investment banks in the 23Q4 quarter was 1.08 billion yuan, -54.1% year-on-year, and +71.1% quarter-on-quarter. The main reason was that the company's investment bank revenue declined due to stricter market IPOs and refinancing regulations. The company's leading edge in investment banking business is expected to continue to benefit from comprehensive registration system reform, leading to performance recovery.
Investment income declined year on year, and asset management business performance was under pressure. In 23, the company's investment income (including fair value) was 10.59 billion yuan, -0.1% year on year; 23Q4 investment income (including fair value) was 3.6 billion yuan, +4% year-on-year, +40.3% quarter-on-quarter. Investment income (including fair value) declined from the same period last year, mainly due to a decrease in net income from financial instruments measured at fair value. By the end of '23, the company's asset management scale was 552.6 billion yuan, -21.3% year-on-year. The net revenue from the company's asset management business in '23 was 1.21 billion yuan, -11.2% year on year; 23Q4 net asset management revenue was 260 million yuan, -16.6% year-on-year, and -11.4% quarter-on-quarter. This is because the reform of public fund fees affected the company's asset management business revenue. The company's asset management business focuses on integrated operation and management of investment and research. In the future, it is expected that it will continue to benefit from favorable policies for high-quality development of the industry and open up room for revenue growth.
Investment advice: As an industry leader, the company will continue to benefit from the development space brought about by comprehensive registration system reform and A-share institutionalization. With the introduction of favorable policies to activate the capital market, it is expected to catalyze the recovery of the company's performance and valuation. In view of the current market downturn, we adjusted the 24-26 net profit to mother to be 70.53 (-26.1%) /73.38 (-24.6%) /76.56 billion yuan, EPS was 1.46/1.52/1.59 yuan, PE was 22.04/21.19/20.31X, and PB was 1.38/1.31/1.25X, respectively, maintaining the A-share “gain” rating.
Risk warning: The downward pressure on the economy is increasing; active capital market reforms fall short of expectations.