Core views:
The quarterly results were in line with expectations, and the contribution of self-employment increased. Total revenue for the Q1 quarter of 2024 was 2,456 billion yuan, -12.6% YoY; net profit to mother was 1,954 billion yuan, -3.7% YoY. The company's 2024Q1 investment income and profit and loss from changes in fair value was 813 million yuan, +64% year over year. Due to the increase in bond investment income and the increase in fair value income from financial instruments, transactional financial assets were basically stable, and derivative financial assets increased 150% year over year to 560 million yuan.
The securities business is generally stable. According to Wind, in Q1 2024, the average daily turnover of AB shares was 895.6 billion yuan, +2% year over year; the balance of the two loans was 1537.9 billion yuan, -4% year over year. The company's handling fee and commission revenue was $1,182 million, +0.3% year-on-year; Q1 raised -3% of capital and net interest income of $522 million, or -5.4% year-on-year. There was some pressure on the size, structure, and interest spreads.
Financial e-commerce revenue declined significantly due to stock restructuring, sluggish new development funds, and rate adjustments. The 24Q1 revenue (non-financial) of the company was 751 million yuan, -30% YoY and -9% YoY.
According to Wind, (1) As of 24Q1, the net value of public funds was 2,885 billion yuan, +9% year over year, of which mixed stock funds were 630 million yuan, -12% year over year. The stock product structure deteriorated, affecting the comprehensive rate. (2) The share of the 24Q1 Xinfa Fund was 271.7 billion shares, +3.5% YoY, of which the share of mixed equity funds was 50.1 billion shares, -47% YoY, affecting Dongcai's front-end traffic revenue. (3) The reduction in management rates for public funds was completed in July 23, and the 23H1 high base is under strong downward pressure on commissions.
The company's 24Q1 sales expenses rate decreased by 1.6 pct to 3% compared to the same period last year, and the R&D expenses rate increased by 2.8 pcts to 12%. The R&D rate has continued to increase since '21.
Profit prediction and investment advice: The company's card is a traffic gateway for the development of the wealth management industry. The company has a traffic+commercialization scenario, and has long been optimistic that Dongcai will benefit from increased R&D and efficiency improvements brought about by AI technology innovation. Considering that all three stages of the public fund rate reform are expected to be implemented within the year, the company's net profit from 2024-2025 is expected to be 8.788 billion yuan and 9.584 billion yuan. Referring to the company's historical valuation center, considering the company's increasing profit model, the company will be given a 2024 valuation of 30 xPE, corresponding to a reasonable value of 16.63 yuan/share, and maintain an “increase in holdings” rating.
Risk warning: Market weakness, sharp decline in trading volume, retracement of the bond market, changes in industry policies, etc.