2023 Annual Report Overview: China Merchants Securities achieved operating income of 19.821 billion yuan, +3.13% year over year; realized net profit to mother of 8.764 billion yuan, +8.60% year over year; basic earnings per share of 0.94 yuan, +9.30% year over year; weighted average return on net assets of 7.91%, +0.37 percentage points year over year. It is proposed to pay 2.52 yuan (tax included) in 2023.

Comment: 1. In 2023, the share of the company's net interest income, investment income (including changes in fair value), and other revenue increased, and the share of net revenue from brokerage, investment banking, and asset management businesses declined. 2. Stock trading volume declined slightly with the market, but the share reached a record high. The scale of consignment sales holdings continued to grow, and net revenue from consolidated brokerage business fees was -14.16% compared to the same period last year. 3. The scale of equity financing declined significantly. Underwriting amounts for various types of bonds rebounded year-on-year, and net revenue from handling fees for consolidated investment banking operations was -6.53% year-on-year. 4. The scale of brokerage asset management and net revenue both declined, and the revenue contribution of public funds declined slightly. Net revenue from processing fees from consolidated asset management operations was -13.99% year-on-year. 5. Continued development of neutral investment business. The return on fixed income investment significantly outperformed the benchmark index, and consolidated investment income (including changes in fair value) was +21.94% year-on-year. 6. The balance of the two loans and the size of stock pledges both showed a slight year-on-year recovery, with net income from consolidated interest +8.20% year-on-year.

Investment advice: The company's share base trading volume market share and wealth management AUM continued to reach record highs during the reporting period; neutral business and fixed income investment two-wheel drive investment income (including fair value changes) improved; although the public fund business declined slightly, the overall profit contribution was still leading the industry; the company withstood downward market pressure, and the overall operating performance was superior to the industry. As the largest brokerage firm within the State Council's State-owned Assets Administration Commission system, the company is expected to continue to benefit from the policy direction of supervising and supporting advantages and disadvantages and building first-class investment banks in the future. The company's 2024 and 2025 EPS is expected to be 0.86 yuan and 0.96 yuan, respectively, and the BVPS will be 12.96 yuan and 13.70 yuan respectively. Based on the closing price of 13.90 yuan on April 8, the corresponding P/B will be 1.07 times and 1.01 times, respectively, maintaining an “increase in holdings” investment rating.

Risk warning: 1. The weakening equity and fixed income market environment has led to a decline in the company's performance; 2. Risk of market fluctuations; 3. The policy effects of investment-side reforms fall short of expectations