Incident: The company disclosed its 2023 annual report, achieving full year operating income of 23 billion yuan (YoY -11.87%), net profit to mother of 6.2 billion yuan (YoY -18.97%), weighted average ROE of 6.43% (YoY-2.45pct), and EPS of 1.138 yuan (YoY -21.99%). By business, the company achieved net revenue of 4.5 billion yuan, 3.7 billion yuan, 1.2 billion yuan, -1.3 billion yuan, 10.6 billion yuan in 2023, respectively, -13%, -47%, -11%, -30% (loss +300 million yuan), and -0.5% compared with the same period last year. Among them, investment banking business owners are affected by the slowdown in IPOs and refinancing, while credit businesses are constrained by rising interest rates on overseas financing.
Revenue from the stock and fixed income segments declined, and the international layout progressed steadily. 1) In terms of the stock business, revenue in 2023 was -12% to 5.3 billion yuan, and profit margin was -5.95pct to 73.03% year over year, mainly due to a decrease in net income from fees and commissions related to brokerage business and capital referral business, and an increase in interest expenses. The company has covered more than 11,000 domestic and foreign institutional investors, and its connected transaction share remains at the top of the market. CICC Hong Kong Securities was approved as the first batch of market makers under the dual counter model, and it is optimistic that the company will continue to advance the process of institutionalization and internationalization. 2) In terms of fixed income, revenue in 2023 was -19% to 2.5 billion yuan, and profit margin was -3.65pct to 60.76% year over year, mainly due to a decrease in net investment income from public REITs funds and a decrease in net income from fees and commissions related to debt underwriting business. The company has mainland China and Hong Kong as its dual center. The volume of cross-border settlement continues to increase, and I am optimistic that the company's cross-border business capacity will steadily improve.
The scale of the asset management business has shrunk, and CICC has been developing steadily. 1) In terms of the asset management department, as of the end of 2023, the business scale of the company's asset management department was 552.6 billion yuan (of which the consolidated and single asset management scales were 138.8 billion yuan and 413.7 billion yuan respectively), -21% compared to the end of the previous year, and the number of managed products was 758. 2) In terms of CICC funds, as of the end of 2023, the asset management scale of CICC Fund was 138.5 billion yuan, +25% compared to the end of the previous year, of which the public fund size was 127.2 billion yuan, +26% compared to the end of the previous year. 3) In terms of private equity, as of the end of 2023, the company's private equity business managed assets of 401.8 billion yuan.
Wealth management bucked the trend to expand customers, and product holdings continued to grow. By the end of 2023, the total number of the company's wealth management customers was 6.8 million, +17% compared to the end of the previous year; the total asset value of customer accounts was 2.88 trillion yuan, +4% compared to the end of the previous year, and the number of customers and asset volume increased even in a volatile market environment. Furthermore, the company's wealth management business product holdings are about 350 billion yuan, and it has been growing for four consecutive years. I am optimistic that the company will continue to make efforts to transform buyer investment.
Equity has shrunk and debt has expanded, and the ranking remains at the top of the industry. 1) On the domestic side, the company's lead underwriting IPO volume was 32.2 billion yuan, -39%, ranking fourth in the market; the lead underwriting and refinancing scale was 49.3 billion yuan, -61% year over year, ranking third in the market; and the debt scale was 1159.5 billion yuan, +26% year over year, ranking fourth in the industry. 2) Overseas, as a sponsor/global coordinator/bookkeeper, the company underwrote Hong Kong stock IPOs of 1.2 billion US dollars/1 billion US dollars/100 million US dollars/500 million US dollars respectively, all ranking first in the market.
Investment advice: Maintain a Buy-A investment rating. The performance of the company's various business segments in 2023 was affected to varying degrees by the market environment, but the wealth management sector still made a breakthrough against the trend. Looking ahead, in the context of stricter regulations and increased competition in the industry, the company is expected to benefit as a leading brokerage firm.
We expect the company's 2024-2026 EPS to be 1.38 yuan, 1.52 yuan, and 1.71 yuan, respectively, and will be given 1.7 x 2024 P/B, corresponding to a target price of 38.31 yuan for 6 months.
Risk warning: Liquidity has been drastically tightened, wealth management transformation falls short of expectations, capital market fluctuations, etc.