Introduction to this report:
The decline in the company's net profit is mainly due to insufficient demand for residents' equity funds combined with rate reforms, putting pressure on fund consignment revenue; it is expected that the company's increased investment in AI-related technology will drive the growth of wealth management and B-side financial information services.
Key points of investment:
Maintaining the “overholding” rating, the target price was lowered to 22.40 yuan/share, corresponding to 40xP/E in 2024. The company's 2024Q1 adjusted revenue (including investment business revenue) was 3.269 billion yuan, -1.08% year on year; net profit to mother was 1,954 billion yuan, -3.70% year on year. The performance was in line with expectations. The decline in net profit due mainly to the decline in fund sales, handling fees and commission income, maintaining the company's 2024-2026 EPS of 0.56/0.59/0.61 yuan. Maintaining the “Overweight” rating, the target price was lowered to 22.40 yuan, corresponding to 40xP/E in 2024.
Insufficient demand for residents' equity funds combined with pressure on fund consignment revenue due to rate reforms is the main reason for the decline in the company's performance. 1) 2024Q1, the company's operating revenue (mainly fund consignment revenue) was -30% to 751 million yuan, contributing 915% of the total decline in adjusted revenue. Insufficient demand for equity funds due to low residents' risk appetite was the main reason for the decline in consignment sales. The scale of new equity fund issuance during the same period was -47% to 50.1 billion shares; 2) Net interest rate reform further drove the decline in fund consignment revenue; 2) Net interest income was -5.39% to 522 million yuan, contributing to an adjusted adjustment of -5.39% to 522 million yuan After that, revenue declined 83% of the total amount increased the pressure on performance. 3) Thanks to the company's increased allocation of bond-like assets, the company's investment income increased sharply to 812 million yuan, 64% over the same period last year, and the return on investment reached 4.7%, slowing down the decline in performance.
Costs have generally declined, and R&D investment is still increasing; AI products are being implemented at an accelerated pace, and AI empowerment is expected to drive performance growth. The company's total operating cost was -5.77% to 1,041 billion yuan; the reduction in total costs was mainly due to a decrease in management expenses and sales expenses, which decreased by 5.73%/40.34%, respectively. R&D expenses were +15.55% to 284 million yuan compared to the same period, which is expected to be mainly due to the company's continued investment in large models. The “Miaoxiang” financial model independently developed by the company has officially begun closed testing. It is expected that related digital intelligence products will be launched in the near future. The “Miaoxiang” financial model relies on data characteristics and algorithm advantages, and is continuously optimized in financial scenarios such as financial advancement, investment and research quality improvement, and transaction efficiency improvement, and is expected to better enhance wealth management services and B-side financial information services.
Catalyst: Capital market trading is active, and residents' demand for wealth management continues to grow.
Risk warning: The capital market has declined sharply.