Matters:
Dongfang Wealth released its 2024 quarterly report, achieving total operating income of 2,456 billion yuan (YoY -12.60%); net profit to mother of 1,954 billion yuan (YoY -3.70%); total assets of 257.301 billion yuan, net assets belonging to the parent company of 73.484 billion yuan, EPS (diluted) 0.12 yuan, and BVPS 4.66 yuan.
Ping An's point of view:
The main business continues to be under pressure, and R&D investment remains high. 24Q1 net income from handling fees and commissions, interest income, and operating income were +0.3%/-5%/-30%, respectively, accounting for 48%/21%/31% of total operating income. The cost side continued to increase R&D investment, with 24Q1 management expenses of 550 million yuan (YoY -6%), management fee rate 22.9% (YoY+1.7pct); R&D expenses of 280 million yuan (YoY +16%), R&D expenses of 11.6% (YoY+2.8pct). Overall, the 24Q1 company's annualized ROE was 10.75% (YOY-1.5pct).
Proprietary investment income increased sharply year over year, driving the decline in profit narrowing. 24Q1 self-operating income of 81 million yuan (YoY +65%), proprietary investment scale of 87.2 billion yuan (YoY +10%), +4% compared to the beginning of the year, corresponding to an annualized return on investment of 3.7% (YoY+1.2pct).
Market turnover has recovered marginally, and net brokerage revenue is expected to increase year-on-year. 1) Broker: According to Wind, the average daily turnover of the 24Q1A stock market is 1021.7 billion yuan (YoY +7%). 24Q1's net revenue from fees and commissions (mainly net revenue from brokerage business, accounting for 98% in 23 years) was $1.18 billion (YoY +0.3%). 2) Two loans: The balance of the two loans in the market at the end of 24Q1 was -7% to 1.54 trillion yuan, and the company's financing capital (mainly the two financing funds) was -3% from the beginning of the year to 44.8 billion yuan. The decline was narrower than the market, and the market share is expected to increase further. 24Q1 net interest income of $520 million (YoY -5%).
Emerging funds in the market continued to be sluggish, and the company's fund business continued to drag down overall performance. According to Wind, the 24Q1 market had 292 newly issued funds, with a share of 243.4 billion shares (YoY -5%), of which 172 equity funds (stock+hybrid) were newly issued and 54.6 billion shares (YoY -29%), compounded by the reduction in active equity fund management rates, which dragged down commission revenue. The company's fund sales performance is expected to remain under pressure. Operating revenue (mainly fund consignment revenue, accounting for 93% in 23 years) was 750 million yuan (YoY -30%).
Investment advice: Considering the recent recovery in trading activity in the A-share market, the company's leading edge in user traffic and internet wealth management still exists. At the same time, the company's self-developed “fantasy” financial model has officially begun closed testing, which is expected to further enrich the company's product ecosystem and improve the long-term growth of the wealth management industry and company fundamentals. Recently, the company has also further strengthened market confidence through the “Double Improvement of Quality and Return” action plan, share repurchases, and a new round of equity incentive drafts. Maintain the company's net profit forecast for 24/25/26 at 90.7/100.0/11.12 billion yuan, corresponding to a year-on-year increase of 10.7%/10.3%/11.2%, maintaining the “recommended” rating.
Risk warning: 1) The equity market has fluctuated greatly; 2) the macroeconomic downturn has reduced investors' risk appetite; 3) competition in the fund consignment industry has intensified unprecedentedly; 4) the volume of newly developed funds, fund purchases, and fund holdings have declined; 5) the development of new businesses has been blocked.