Incident: Guoxin Securities released its 2023 annual report, in line with expectations. Achieved annual revenue of 17.32 billion yuan/yoy +9.1%; realized net profit of 6.43 billion yuan/yoy +5.6%, of which 4Q23 profit was 1.55 billion yuan/yoy +17% /qoq +21%; and weighted ROE of 6.6% /yoy+0.07pct in 2023.
The improvement of the investment business supports profits, and the asset management business has performed well. 23. The company's main securities revenue for the whole year was 14.8 billion yuan/yoy +8%. 1) Main revenue split: Brokerage, investment banking, asset management, net interest, and net investment achieved revenue of 43.6 billion yuan, 13.6, 5, 17.5, and 6.19 billion yuan, respectively, compared with -15%, -25%, +54%, and +62%, respectively; 2) Looking at the revenue structure of the main business, brokerage accounts for 29.4%, investment banks accounts for 9.2%, asset management accounts for 3.3%, net interest accounts for 11.8%, and net investment accounts for 41.8%.
Investment leverage has been steadily increased, and returns have improved. At the end of 23, the company's total assets were 463 billion yuan/qoq +13% /yoy +17%, and the operating leverage at the end of the period was 3.68 times/qoq+0.43 times/yoy+0.55 times. In terms of investment business, the end-of-period investment leverage was 2.69 times/qoq+0.35 times/yoy+0.61 times; the financial investment scale at the end of 23 was 296.6 billion yuan/qoq +16% /yoy +34%; it is estimated that the 23-year annualized return on investment was 2.39% /yoy+0.5pct.
Brokerage revenue is under pressure, and the transformation of wealth management is under pressure. 1) At the end of '23, the company's brokerage business clients had more than 2.1 trillion yuan in assets, with brokerage business revenue of 7.47 billion yuan/yoy -10%, including revenue of 4.48 billion yuan/yoy -11.3%; revenue from the escrow financial products business of 400 million/yoy -27%; and transaction unit seat rental revenue of 300 million/yoy -16.4%. 2) Deepen wealth management transformation and build wealth management series brands such as “Guoxinxin Investment”, “Guoxinxin Smart Investment”, “Guoxinxin Preferred”, “Guoxinxin Private” and “Guoxin Xinxiang Heritage”. The first batch obtained personal pension fund sales business qualifications, and asset allocation capabilities continued to improve.
Investment banks' revenue is under pressure, and the industry rankings are at the top. 1) Equity underwriting: Based on Wind's issuance date statistics, the company had 13 lead underwriters for IPOs in '23, with a lead underwriting scale of 9.88 billion yuan/yoy -29.3%, ranking 8th in the industry/the same as the previous year; 16 refinancing companies, with an underwriting scale of 19.9 billion yuan/yoy +39.9%. 2) In terms of bond underwriting: The underwriting scale of corporate bonds in '23 was 237.21 billion yuan/yoy +12%, ranking 17th in the industry.
Penghua Fund's profit contribution reached 6%, and the scale of brokerage asset management increased. 1) Public offering business: The company carried out public offering business through the participating company Penghua Fund (holding 50% of shares). In '23, Penghua Fund achieved net profit of 840 million yuan/yoy -16.2%, contributing 6.5% of the company's profit. The non-cargo management scale at the end of the period ranked 10th in the industry; 2) Brokerage asset management: Total management scale increased by 14.7% in 23 years, of which the consolidated asset management business scale was 77.48 billion yuan/yoy +37.5%, and the scale of the single asset management business was 49.61 billion yuan/yoy +37.5%, special Asset management business scale is 27.97 billion dollars/yoy -12.7%. In the future, the company will continue to optimize the investment and research system, accelerate the exhibition of asset management subsidiaries (established and approved in November 23), and make every effort to achieve high-quality development.
Investment analysis opinion: Give Guoxin Securities a “recommended” rating. The estimated net profit of Guoxin Securities in 2024-2026E will be 6.04 billion yuan, 6.57 billion yuan, and 7.24 billion yuan, respectively, -6%, +9%, and +10% compared with the same period last year. The 4/16 closing price corresponds to the company's 24-26E dynamic PB of 0.97 times, 0.93 times, 0.88 times, and dynamic PE of 17 times, 15 times, and 14 times.
Risk warning: capital market reforms fell short of expectations; market liquidity fell short of expectations; the stock market fell sharply.