Core views:
Performance growth in 2023 slightly exceeded expectations. The company disclosed its 2023 annual report, achieving revenue of 36.578 billion yuan, +14.19% year-on-year; net profit to mother was 12.751 billion yuan, an increase of 15.35% over the previous year. Net profit for the quarter in Q1/Q2/Q3/Q4 was +46.5%/+4.7%/+23.9%/-2.1%, respectively. The leverage ratio excluding agency payments rose from 4.13 at the end of 2022 to 4.17 times at the end of 2023. The 2023 weighted average ROE was 8.12%, +0.08 percentage points year over year.
Consolidate the advantages of pan-wealth management. In 2023 (1), brokerage business net revenue was 5.959 billion yuan, -15.75% year-on-year. The company's mixed public equity holdings were RMB 134.5 billion and non-commodity public holdings amounted to RMB 159.7 billion, all ranking second in the securities industry. (2) Asset management transformation has achieved remarkable results, and performance continues to improve. The net revenue of Huatai Securities's asset management business was 4.256 billion yuan, +12.9% year-on-year. Net revenue from fund management operations was $1,008 billion, +6% year over year. Huatai's total asset management scale was 475.5 billion yuan, -0.9% year-on-year. Southern Fund and Huatai Berry Fund achieved net profit of 20.11 billion yuan and 502 million yuan respectively, +13.59% and +32.25% year-on-year respectively. (3) The revenue of the two finance loans was 7.839 billion yuan, and the market share of securities lending was 7.42%, an increase of 0.29 pct.
The institutional business continued to maintain its leading edge. In 2023 (1), the net revenue from the investment banking business was 3,037 billion yuan, -24.54% year-on-year. 72 companies ranked third in terms of the number of underwriters. Equity underwriting amount - 41%, bond underwriting amount +28%. (2) The company achieved self-operated investment income of 8.177 billion yuan, +100% year-on-year. In terms of derivatives business, revenue swap in 2023 was 99.681 billion yuan, -10.5% year over year; OTC options business continued at 149.190 billion yuan, +18.4% year over year.
Profit prediction and investment advice: In the process of building first-class investment banks and investment institutions, Huatai Securities, which is driven by two wheels in wealth management and institutional services, is expected to further benefit from its leadership, international advantages and asset management characteristics. EPS for 24 is estimated to be $1.36, and net assets per share are $20.8. Combined with the valuation center of the past three years, the company will be given a valuation of 1.2xPb for A-shares in 2024, corresponding to a reasonable value of 24.96 yuan/share. Considering the A-share/Hong Kong stock premium, the corresponding reasonable value of HK$15.89 per share for H shares will all be given a “buy” rating.
Risk warning: large market fluctuations, risk of policy changes, increased business competition, etc.