Incident: Dongfang Wealth released its 2024 quarterly report. The company achieved revenue of 2,456 billion yuan in the first quarter, -12.60%; net profit to mother of 1,954 billion yuan, -3.70% year over year; weighted average ROE of 2.69%, down 0.38 pct year on year.
Comment:
Securities business: Q1 revenue +13.2% YoY, mainly driven by proprietary business. 2023Q1, the company's securities business achieved revenue of 2,516 billion yuan, +13.2% year-on-year. Among them, handling fee and commission income/net income from interest/revenue from proprietary operations were respectively $1,182/5.22/ 811 million yuan, or +0.3%/-5.4%/+64.9% year-on-year.
The market share of brokerage business and dual finance business increased slightly, and the increase in the scale of self-operation contributed to investment income. In terms of brokerage business, 2024Q1, total industry stock base turnover was $59.26 trillion, +1.3% year over year.
The 2024Q1 stock fund in Tibet traded 536 million yuan. Based on this, we estimate that the company's 2024Q1 stock fund turnover was 4.81 trillion yuan, with a market share of 4.06%, +0.05pct compared to the beginning of the year.
In terms of the dual-finance business, as of 2024Q1, the market balance of dual finance was 1.54 trillion yuan, -6.8% compared to the beginning of the year.
The company's financing and securities lending business raised 44.783 billion yuan, and the company's share of the two financing markets was 2.91%, +0.11pct compared to the beginning of the year. The scale of financial assets has increased, and the income contribution of proprietary investment has increased markedly. The company's 2024Q1 self-operating investment revenue was 811 million yuan, +64.9% year-on-year. The scale of proprietary investment continued to rise. By the end of 2024Q1, the company's financial investment assets were RMB 86.855 billion, +3.4% compared to the beginning of the year.
Fund business: Affected by the year-on-year decline in the fund market, 2024Q1 revenue was -30.3% YoY.
2024Q1, the company's fund business revenue was 751 million yuan, -30.3% year-on-year. We expect it to be mainly affected by the year-on-year decline in the fund market. 2024Q1, the market size of “stock+hybrid” new development funds was 54.6 billion shares, -41.6% year-on-year. The “share+hybrid” fund survives at $6.24 trillion, +2.1% compared to the beginning of the year.
Profit prediction and investment rating: We believe that with the development of investment-side reforms in the capital market, the company is expected to benefit from the equity and institutionalization of residents' wealth management, and the growth brought about by the long-term increase in the scale of the wealth management circuit. The application of AIGC is also expected to catalyze the improvement of the company's operational and product capabilities, and achieve a further increase in market share. Furthermore, we believe that the company will also use capital businesses such as self-management and dual financing to accelerate development and achievement of performance. We expect 2024-2026E net profit to be 93.86/106.78/12.351 billion yuan, respectively, corresponding to 2024-2026E PE of 20.94x/18.40x/15.91x, maintaining a “buy” rating.
Risk factors: Investment-side reforms in the capital market fell short of expectations, implementation of AIGC applications fell short of expectations, profit fluctuations in proprietary business; decline in fund sales rates exceeding expectations; decline in customer risk appetite, etc.