Core views:

Nanhua Futures released its 24Q1 quarterly report. 2024Q1 revenue was 992 million yuan, a year-on-year decrease of 28.3%, and net profit due to tax deductions in 24Q1 was 85 million yuan, an increase of 49.8% year-on-year, and a decrease of 18% over the previous year. The decline in revenue is due to the company's pressure on the risk management business, while net profit continued to grow mainly due to the increase in interest income from futures margin interest, benefiting from high overseas interest rates after deducting the risk management business.

Overseas business achieved steady growth. (1) According to the company's annual report, as of the end of 2023, domestic futures brokerage business customer equity was 21,248 billion yuan, an increase of 11.32% over the previous year. Domestic equity was represented by currency and pledge deposits payable by the parent company. In 24Q1, domestic equity changed by -6.32% and 4.80%, respectively, compared to the end of 23 and 22. (2) In terms of overseas futures business, in 2023, the company further consolidated and developed the advantages of clearing business, and successfully obtained liquidation qualifications from the Minneapolis Grain Exchange. According to the total security deposit payable and the parent company's domestic equity size, the combined security deposit payable - the parent company simply represents a change in the size of the company's overseas equity. By the end of 23, the corresponding value was 7.2 billion yuan, and as of 24Q1, the corresponding value was 9.2 billion yuan, an increase of nearly 30% over the end of '22. (3) Strengthening overseas layout is expected to further develop the advantages of sound overseas trading and clearing licenses and build core competitiveness around overseas business.

The Federal Reserve's interest rate cut may be delayed, and it is expected to continue to contribute to the company's performance growth. (1) Interest income from margin deposits in the company's overseas brokerage business benefits from high overseas macro interest rates. Against the backdrop of the uncertain attitude of the Federal Reserve to cut interest rates, overseas business is expected to continue to contribute to increased performance. (2) Against the backdrop of fluctuations in the interest rate environment at home and abroad, attention to financial futures has increased, and the importance of futures companies playing a role in financial safe-haven is becoming more and more obvious.

Profit forecasting and investment advice. The estimated revenue for 2012 was 5.864 billion yuan, and net profit to mother was 486 million yuan, an increase of 21% over the previous year. The company's average PE value from the beginning of '23 is 24x, and the average PE value from the beginning of '24 is 16x. Based on EPS of 0.80 yuan in '24, the PE valuation is 18x, which corresponds to a reasonable value of 14.4 yuan/share, giving the company an “increase in holdings” rating.

Risk warning. The economic downturn lowered handling fees, the impact of domestic and overseas monetary policies, interest income falling short of expectations, etc.