Consignment revenue has declined markedly, and the securities business is relatively bright
2024Q1's total operating revenue/net profit to mother was 2.46/1.95 billion yuan, -12.6%/-3.7% YoY, after deducting non-net profit of 1.94 billion yuan, +2.4% YoY. The revenue from consignment sales was lower than our expectations, and the net profit after deducting non-net profit was slightly lower than our expectations. Fund consignment revenue was under pressure, the market share of the securities business increased, and income from proprietary investments increased year-on-year. Considering the downturn in partial equity funds and the company's consignment sales revenue for the first quarter was lower than our expectations, the revised company's net profit forecast for 2024-2026 was 86/101/117 billion yuan (adjusted 91/108/125), +5%/+17%/+16% year-on-year, and the corresponding EPS was 0.54/0.63/0.74 yuan. The current stock price corresponds to 2024-2026 PE 22.7/19.5/16.8 times. On April 12, the company cancelled the previous 1 billion repurchased shares (0.45% of the total share capital), which is beneficial to increasing earnings per share and demonstrating the company's confidence in development and recognition of its own value. The company announced the 2024 restricted equity incentive plan, awarding 871 people 40 million shares (0.25% of total share capital) at 13.75 yuan. The average annual net profit growth rate of nearly 10% was in line with the current market environment and the company's steady growth confidence in the three vesting periods. The market share of the company's securities business continues to rise, and the capital-light model is expected to maintain a valuation premium. The company has fully benefited from the increase in retail customer trading activity. The current valuation has a margin of safety. It is concerned about stock market and fund beta catalysis, the subsequent public fund channel rate reform, and maintains a “buy” rating.
Scale and sales volume declined month-on-month, compounded by fee cuts. Consignment sales revenue weighed on the company's revenue of 750 million yuan (mainly contributed by fund sales) of 750 million yuan, -30% year-on-year and -9% month-on-month, lower than our expectations. The 2024Q1 partial share fund index fell 2.8%, and the net redemption of OTC partial equity funds. The total market share fund holdings were -10.8% year-on-year and -0.6% month-on-month. Combined with the impact of fee cuts, the company's final commission income was under pressure. The 2024Q1 market issued 546/243.4 billion new shares of partial share/non-commodity funds, -41%/-6% year over year, and -14%/-36% month over month. It is expected that front-end consignment fee revenue will decrease due to pressure on the company's fund sales.
The market share of brokerage and finance continued to rise, with impressive earnings from proprietary investment (1) The company's net income from handling fees and commissions was 1.18 billion yuan, +0.3% year-on-year, and the average daily share base turnover of the market was +4% year-on-year. It is expected that commission rates or futures brokerage will drag down the overall fee revenue growth rate. According to the turnover market share in the Tibet region, the company's share base turnover market share is expected to be 4.12%, a further increase from 4.01% in 2023. (2) Net interest income of 520 million yuan, -5% year-on-year, with a market share of 2.99% from the two financing funds, +0.06pct compared to the beginning of the year, and +0.37pct year-on-year. The capital raised at the end of the period was 44.8 billion yuan, +12% compared to the beginning of the year. (3) Proprietary investment income was 810 million yuan, +65% year over year, and both scale and yield increased year on year. Financial investment assets at the end of the period were 77.9 billion yuan, +12% year over year, +7% compared to the beginning of the year, and the return on annualized proprietary investment was 4.3%, and +1.3 pct year on year. The increase in the bond market clearly drove self-employment to exceed expectations. (4) 2024Q1 sales, management and R&D expenses were 0.8/56/ 280 million yuan, -40%/-6%/+16% year-on-year. The three types of expenses accounted for 38% of revenue, an increase of 3 pcts over 2023.
Risk warning: risk of market fluctuations; uncertainty about fund channel fee reduction policies; market share growth falls short of expectations.