CITIC Construction Investment released its 2020 annual report. It achieved annual revenue of 23.243 billion yuan, a year-on-year decrease of 15.68%, and realized net profit to mother of 7.034 billion yuan, a year-on-year decrease of 6.45%. The fourth quarter of 2023 achieved operating income of 4.86 billion yuan, the same level as the previous year, and achieved net profit of 1,343 billion yuan to mother, an increase of 25.45% over the previous year. The company's financial leverage ratio in 2023 was 4.4 times, up 0.05 times from 2022. The weighted average ROE was 8.59%, down 1.42pct year on year.

Comment:

Affected by the contraction in the scale of equity financing, the company's investment banking business revenue is under pressure. In 2023, the company's investment banking business achieved revenue of 4.796 billion yuan, a year-on-year decrease of 19.07%. The main reason for the decline was the contraction in the scale of equity underwriting. Affected by the contraction in the A-share market share issuance scale in 2023, the company's share underwriting scale was 94.776 billion yuan, down 28.95% year on year, ranking 2nd in the industry. Among them, the IPO underwriting scale was 40.754 billion yuan, a year-on-year decrease of 30.58%, and the refinancing underwriting scale was 54.022 billion yuan, a year-on-year decrease of 27.66%, all ranking 3rd in the industry. The debt financing business performed well. The main underwriting scale in 2023 was 1545.706 billion yuan, ranking 2nd in the industry, and the competitive advantage in the business market is remarkable.

The change in fair value income from negative to positive led to a high increase in revenue from proprietary businesses. In 2023, the company achieved revenue of 6.842 billion yuan from its own business, an increase of 50.96% over the previous year, partially offsetting the impact of the decline in revenue from other businesses. Specifically, investment income fell 23.24% year on year. The main reason for the decline was that income from disposal of financial instruments fell 92.46% year on year to 154 million yuan. The company's revenue from fair value changes in 2023 was 2,228 billion yuan, and in 2022 it was -1,474 billion yuan. The main reason for the increase was the increase in revenue from fair value changes in transactional financial assets, which was 826 million yuan in 2023 (-3.777 billion yuan in 2022), which led to a high increase in the company's own business revenue.

Revenue from brokerage, asset and fund management, and credit businesses is under pressure. (1) Affected by the decline in market share base transaction volume, the company's brokerage business revenue fell 6.19% year on year to 5.563 billion yuan. In 2023, the company developed 1,217,600 new brokerage clients, with a cumulative total of 13.3732 million customers, an increase of 10.20% over the previous year. (2) In 2023, the company's asset management scale fell 1.69% to 469.4 billion yuan, and the pooled asset management scale was 120,736 billion yuan, down 41.06% year on year, accounting for 25.72%, down 17.18 pcts year on year. The contraction in scale compounded the decline in the share of pooled asset management. Revenue from asset management and fund management businesses fell 10.83% year on year to $1,314 billion. (3) The company's credit business revenue in 2023 was 1,712 billion yuan, a year-on-year decline of 28.39%. The balance of the two finance business was 58.997 billion yuan, down 1.68% year on year, market share decreased by 0.33pct, and financing accounts increased 4.04% to 183,400 households.

Investment advice: The company's strength ranks among the highest in the industry, and the competitive advantage in the investment banking business market is remarkable. Against the backdrop of a gradual improvement in the market, the company's main business revenue is expected to achieve positive growth. The company's net profit for 2024-2026 is estimated to be 92.54/107.48/12.485 billion yuan, respectively, for the first time covered with a “buy” rating.

Risk warning: The company's performance fell short of expectations, policy changes, and equity market fluctuations intensified.