Incident: On April 24, Dongfang Wealth released its 2024 quarterly report. The performance was better than expected. 1Q24 achieved total revenue of 2.46 billion yuan/yoy -12.6%, achieved net profit of 1.95 billion yuan/yoy -3.7%, and realized deducted non-net profit of 1.94 billion yuan/yoy +2.4%; 1Q24 weighted average ROE (unannualized) was 2.69% /yoy-0.38pct.
Under low market conditions, 1Q24 segment revenue was under pressure, and net revenue from handling fees and commissions increased positively. 1) Revenue split: 1Q24's total revenue was 2.46 billion yuan/yoy -12.6%, of which operating income (mainly fund sales), net interest income (mainly two loans), net fee and commission income (mainly brokerage business) were 7.5, 5.2, and 1.18 billion yuan, respectively, -30.3%, and +0.3%, contributing revenue to 30.6%, 21.3%, and 48.1%; the obvious pressure on operating income was due to the decline in financial e-commerce revenue. 2) Increase R&D investment: 1Q24 invests 280 million yuan/yoy +15.5% in R&D, and the R&D cost rate is 11.6% /yoy+2.82pct.
The fixed income business contributed to a high increase in the company's 1Q24 investment income, and the return on investment increased year-on-year. The total assets of the 1Q24 company were 257.3 billion yuan/+7.4% compared to the end of 23, and net assets were 73.5 billion yuan/+2.1% compared to the end of 23; of these, the size of transactional and derivative assets was 70.3 billion yuan/+2.4% compared to the end of 23. The 1Q24 company achieved investment business revenue (including exchange) of 81 million yuan/yoy +63.7% /qoq +30.7%, mainly due to an increase in bond investment income; the 1Q24 investment annualized return was estimated at 4.68% /yoy+1.70pct.
The basic market of the securities business is stable, and the market share of the two finance business has increased. 1) In terms of brokerage business, the company's fee and commission revenue during the reporting period was 1.18 billion yuan/yoy +0.3%, while the market share base ADT grew at a year-on-year rate (+3.9%). 2) In terms of the two finance business, the company raised 44.8 billion yuan at the end of 1Q24, -3.2% compared to the end of 23, and the share of the two finance market was 2.91%/+0.11pct compared to the end of 23.
The fund market continues to be sluggish, which is expected to slow down the performance of the consignment business. 1) The fund market continues to be sluggish:
The share of newly developed funds in the 1Q24 market was 2308 billion units/yoy -14.5%, including 48.1 billion shares of the new partial share fund /yoy -51.4%. At the end of the first quarter, the market mixed stock fund size was 6.7 trillion yuan/-0.6% /yoy -10.8% compared to the end of 23. 2) Dongcai led the market share market share: 4Q23 Dongcai (Tiantian Fund+Oriental Wealth Securities) had a mixed holding scale of 447.1 billion yuan/qoq -5% /yoy -10%, holding volume market share of 7.11% /qoq+1bp, and Tiantian Fund's mixed market share ratio of 6.41% /qoq-6bp ranked 3rd in the market.
Investment analysis opinion: The market share of the company's brokerage and consignment sales business continues to be maintained, and the depth of implementation of the model empowers various business lines. The company is expected to benefit from the trend of moving residents' deposits in the long term and maintain a “recommended” rating. The estimated net profit of Dongfang Wealth in 2024-2026E will be 8.09 billion yuan, 8.55 billion yuan, and 9.43 billion yuan, respectively, -1%, +6%, and +10% compared with the same period last year. The current closing price corresponds to 24-26E dynamic PE of 24.3 times, 23.0 times, and 20.8 times.
Risk warning: large-scale net redemptions of public funds; fund sales side fee reform exceeds expectations; market liquidity falls short of expectations.