Incidents:
On March 28, Huatai Securities announced its 2023 annual financial report. The company achieved revenue of 36.58 billion yuan in 2023, an increase of 14.2% over the previous year; net profit to mother of 12.75 billion yuan, an increase of 15.4%; the company's weighted average ROE for fiscal year 23 was 8.12%, an increase of 0.63 pct over the same period last year; and basic earnings per share were 1.35 yuan/share.
Comment:
The company's revenue and profit increased significantly year-on-year in '23. The company achieved revenue of 36.58 billion yuan, +14.2% year over year; 23Q4 revenue of 9.35 billion yuan, +11.1% year over quarter, +5.5% quarter over quarter; net profit to mother of 12.75 billion yuan, +15.4% year on year; 23Q4 net profit to mother of 3.17 billion yuan, -2.1% year over quarter, and +4.5% quarter over quarter. In '23, the company's own operation/ broker/ investment bank/ asset management/ credit accounted for 39.0%/16.3%/11.6%/2.6% of total revenue, respectively, +16.4/-5.8/-4.3/-0.1/-5.6pct. The revenue structure changed significantly 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.
The brokerage business was dragged down by market sentiment, and net revenue was -15.8% YoY. 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. In '23, the company's net brokerage fee revenue was 5.96 billion yuan, -15.8%; the 23Q4 single quarter's net brokerage fee revenue was 1.33 billion yuan, -23.5% YoY, and -9.5% quarter-on-quarter, mainly affected by the slump in the A-share market. The company's net interest income in '23 was 950 million yuan, -63.8% year on year; net interest income for the 23Q4 quarter was -82.6% year over year to 100 million yuan, or -55.1% quarter to quarter, mainly due to a significant year-on-year increase in interest expenses in the credit business. Relying on advanced digital platforms, the company is expected to open up incremental space for wealth management business.
IPO regulations became stricter, and the company's investment banking business revenue fell 24.5% under pressure. The number of A-share market IPOs and capital raised in 23 was 313 companies and 356.544 billion yuan, respectively, or -26.9%/-39.2% year-on-year. The initial capital raised by the company's investment banking business in '23 was 17.35 billion yuan, with a market share of 4.9%. The net revenue of the company's investment banking in '23 was -24.5% to 3.04 billion yuan, and the net revenue for the 23Q4 single quarter was 750 million yuan, -33.4% year-on-year, and +9.5% quarter-on-quarter, mainly due to the decline in the company's investment banking revenue due to stricter market IPOs and refinancing regulations. The company's equity financing adheres to deep regional cultivation and is expected to continue to benefit from comprehensive registration system reform.
Investment income surged 96.7% year on year, and active management transformation drove asset management business development. In '23, the company's investment income (including fair value) was 14.26 billion yuan, +96.7% YoY; 23Q4 single-quarter investment income (including fair value) was 4.45 billion yuan, +76.0% year-on-year, and +62.7% quarter-on-quarter. Changes in fair value of financial assets drove a significant increase in self-operating income performance.
By the end of '23, the company's asset management scale was 475.5 billion yuan, and the non-monetary market public fund holding scale was 159.7 billion yuan, ranking second in the industry. The net revenue from the company's asset management business in '23 was 4.26 billion yuan, +12.9% year on year; net revenue from asset management in the 23Q4 quarter was 1.11 billion yuan, -5.5% year over year, and +4.1% quarter over quarter. It is expected mainly due to sluggish market conditions and fund fee reform. The company continues to improve its multi-category and cross-cycle comprehensive asset management capabilities, and the overall scale of asset management is expected to continue to grow.
Investment advice: As a leading brokerage firm with strong comprehensive strength, the company relies on a technology-driven business layout, and is expected to benefit from favorable policies to activate the capital market and catalyze the dual restoration of performance and valuation. We adjusted the 24-26 net profit forecast of 140.0 (-0.5%) /148.6 (+4.8%) /160.4 billion yuan (additional) billion yuan. EPS was 1.55/1.65/1.78 yuan, respectively, corresponding PE (A) 9.05/8.53/7.91 times, and PE (H) was 5.33/5.02/4.65 times, respectively. Considering that the company's leading edge in the field of traditional wealth management on high-quality tracks will continue to help development, we maintain the A share “gain” rating and the H share “buy” rating.
Risk warning: The downward pressure on the economy is increasing; active capital market reforms fall short of expectations.