Event: The company released its 2023 annual report. During the reporting period, the company achieved revenue of 2,321 billion yuan, or -33.98% year-on-year. Achieved net profit of 119 million yuan to mother, +136.60% year-on-year.

As of the end of the reporting period, the company's total assets were 33.041 billion yuan, -5.02% year on year, and net assets attributable to shareholders of listed companies were 11.876 billion yuan, +0.17% year over year. Among them, the subsidiary Xiangcai Securities achieved total operating income of 1,485 million yuan, +37.98% year over year; net profit attributable to the parent company was 244 million yuan, +523.44% year over year.

Proprietary business increased year over year. During the reporting period, the company's own business achieved revenue of 366 million yuan, +1552.25% over the same period last year. The company continues to maintain a steady investment style. While maintaining low leverage and a short period of time, the company strives to increase the scale of low-risk transactional revenue and continuously improve the investment and research system. The company's own business increased year-on-year, mainly because the company achieved a large year-on-year increase in the sum of investment income and income from changes in fair value. The company's own business gradually changed from directional investment to a neutral investment strategy, using fixed income and neutral strategies as the basic market, optimizing the business structure, and focusing on businesses such as FICC, OTC derivatives, quantitative trading, and market making transactions.

Investment banking business is growing steadily. During the reporting period, the company's investment banking business achieved revenue of 158 million yuan, +77.70% year-on-year; operating profit of 57.18 million yuan, or +61.46% year-on-year. The main reason is that Xiangcai Securities has implemented a boutique investment banking strategy. Breakthroughs have been made in the equity and fixed income business, and the scale of underwriting has increased. Xiangcai Securities focuses on the business of the New Third Board and Beijing Stock Exchange to form a differentiated competitive advantage for Xiangcai Investment Bank.

During the reporting period, after the stock market fully implemented the registration system, the underwriting scale of the first IPO project of Xiangcai Securities was 993 million yuan. The company won an “A” rating in the 2023 securities company investment banking business quality rating. In terms of fixed income investment banking business, the bond underwriting scale of Xiangcai Securities exceeded 232 billion yuan, +78.85% year over year; revenue from bond underwriting business reached 97 million yuan, +47% year over year.

Financial and securities lending business performance improved. At the end of the reporting period, the scale of the financing and securities lending business of Xiangcai Securities was 6.554 billion yuan, with an average daily financing balance of 6.408 billion yuan; the operating income of the credit trading business was 449 million yuan, and the operating profit was 432 million yuan. The balance of securities lending business in the Shanghai and Shenzhen markets was 1.65 trillion yuan, +6.9% compared to the beginning of the year.

Investment advice: The company performed well during the reporting period, and the securities sector drove the company's overall profit level to increase. The company's revenue is expected to increase by +20.75%, +11.92%, and +10.61% year-on-year in 2024-2026. Net profit to mother increased by +283.35%, +346.94%, and +382.21% year-on-year. EPS was 0.10, 0.12, and 0.13 yuan/share, respectively. The PE corresponding to the closing price on April 19, 2024 was 66.90, 54.64, and 49.60 times, respectively. Maintain an “Overweight” rating.

Risk warning: declining commission rates, capital market fluctuations, securities business falling short of expectations