Incident: Dongfang Wealth released its 2024 quarterly report, achieving total operating income and net profit of 24.56 billion yuan and 1.954 billion yuan, respectively, of -12.6% and -3.7% year-on-year respectively.
The fund consignment business is under significant pressure, and the securities business contributes to resilience. 1) On the revenue side, 2024Q1 achieved operating income (mainly fund sales), net interest income, handling fees and net commission income (mainly securities brokerage) of 7.51, 5.22, and 1,182 billion yuan, respectively, and -30.3% year-on-year, accounting for 30.6%, 21.3%, and 48.1% of total revenue; 2) on the cost side, total operating costs were -5.8% to 1,041 billion yuan, of which sales expenses, management expenses, and R&D expenses were -40.3%, -5.7%, and +15.5 year-on-year differences % to 0.83, 5.62, and 284 million yuan. Fund sales expenses in weak markets have declined sharply.
The downturn in the fund market has led to a decline in consignment sales revenue. The company's consignment revenue is mainly composed of subscription fees and end commissions. Sales volume and holding volume are the core driving factors: 24Q1 fund market activity is low, and the shares of all newly established funds and equity+hybrid funds in the Wind 24Q1 market were -5.7% and -41.1% year-on-year, respectively. The decrease in subscription fees due to the decline in activity is expected to be the main reason for the decline in the company's consignment revenue; the net stock value of equity and hybrid funds in the 24Q1 end market is also expected to be under pressure.
The brokerage business market share continues to increase, and investment income enhances the company's performance. Stock turnover in the 24Q1 market was +0.2% YoY, and the company's net revenue from handling fees and commissions was +0.3% YoY. The company attached its online trading orders to the Tibet sales department. At the end of March, the share of stock trading in Tibet reached 4.09%, up 0.45/0.25pct year-on-year, respectively. The company's share of the stock trading market is expected to continue to increase; 24Q1's investment income+fair value change profit and loss +64.4% to 813 million yuan, mainly due to financial asset size +9.9% YoY to 813,000,000 yuan, and is expected to increase The 24Q1 return on investment improved significantly year over year.
Investment advice: Optimistic about Dongfang Wealth's long-term growth in the wealth management market expansion. The increase in market share will drive the company's steady growth. The company is expected to achieve net profit of 90.20, 104.83, and 12.127 billion yuan respectively in 2024-2026, +10.1%, +16.2%, and +15.7% year-on-year, respectively. The PE corresponding to the closing price on April 25, 2024 is 21.71, 18.68, and 16.15 times, respectively, maintaining the company's “increase in wealth” rating.
Risk warning: risk of large fluctuations in the capital market; risk of a sharp decline in market transaction scale; risk of a company's business share falling short of expectations; risk of industry regulatory policies exceeding expectations and tightening