Incident: Caitong Securities released its 2023 annual report and 2024 quarterly report. The annual report results were in the middle of the express report, and the 1Q results declined slightly. 1) Achieved revenue of 6.52 billion yuan/yoy +35% in 2023, return to mother profit of 2.25 billion yuan/yoy +48%; weighted ROE 6.67% /yoy+1.71 pct. 2) 1Q24 revenue of 1.41 billion yuan/yoy -21%, return to mother profit of 460 million/yoy -8%; weighted average ROE (unannualized) 1.31% /yoy-0.18pct.
The light capital business continued to outperform its peers. The decline in 1Q24 was mainly due to year-on-year pressure on the investment business.
1) Revenue split for 23 years: brokerage, investment banking, asset management, net interest, net investment, long-term stock investment (mainly Yongan Futures and CaiTong Fund) revenue/year-on-year were 1.2 billion/ yoy +1%, 760 million/yoy +68%, 1.55 billion/ yoy +6%, 540 million/yoy -28%, 1.76 billion/yoy -24%, accounting for 18.7%, 11.7%, 24.3%, 8.4%, 27.5%, and 8.6%, light capital business performance was excellent. Investments Significant business improvements. 2) 1Q24 revenue split: brokerage, investment banking, asset management, net interest, net investment, and long-term stock investment revenues were respectively 300 million/yoy +8%, 140 million/yoy +2%, 120 million/yoy +4%, 430 million/yoy -39%, 50 million/yoy -60%; 1Q24 main revenue share: brokerage 21.8%, investment banking 10.3%, asset management 23.4%, net interest 8.6%, net investment 31.6%, and long-term stock investment 3.9%, respectively.
Investment leverage has been steadily expanding, and yield performance has fluctuated. 1) At the end of '23: The company's total assets at the end of the period were 133.8 billion/yoy +6.41%, net assets of 34.6 billion/yoy +5%, financial investment scale of 69.6 billion dollars/yoy +6%; operating leverage 3.32x/qoq+0.3x, investment leverage 2.01x/qoq+0.21x; estimated return on investment in 2023 2.6% /yoy+2.33pct. 2) At the end of the first quarter of '24: The company's total assets at the end of the period were 140.7 billion/ yoy +5.19%, financial investment scale of 76.9 billion yuan/yoy +16%; operating leverage of 3.45x/qoq+0.13x, investment leverage 2.19x/qoq+0.18x; estimated annualized net return on investment of about 2.36% /yoy-1.95pct, which is expected to be pressured mainly by equity self-operation.
In total, the public asset management business contributed 28 pcts of the Group's profit. The company participated in 40% of the shares in Caitong Fund, and its wholly-owned subsidiary CaiTong Asset Management holds a public offering license. In '23, CaiTong Asset Management and Caitong Fund achieved net profit of 460 million and 170 million respectively, +1.1% and -10% year-on-year respectively, contributing 28% of the parent company's profit. 1Q24 Caitong Asset Management (mainly fixed income + products) and CaiTong Fund's non-commodity public AUM were 102.8 billion yuan and 69 billion yuan respectively, +5% and +9% month-on-month, and +14% and +48% year-on-year respectively.
Investment banking business performed well in '23; 1Q24 was weighed by policy tightening. The company actively creates new business cards featuring “Science and Innovation Investment Bank”, “State-owned Investment Bank”, and “Gongfu Investment Bank” to further expand and deepen the full-chain service system. According to statistics from the release date, the company's 23 IPO scale was 4.1 billion/yoy +376%, refinancing scale was 3 billion yuan/yoy +30%, and bond underwriting scale was 125.1 billion yuan/yoy +85%.
Investment Analyst Opinion: Maintaining the “Highly Recommended” rating. Net profit for 2024-2026E is estimated to be $2.44, 27.3, and 2.98 billion, respectively; the 4/25 closing price corresponds to 24-26 dynamic PB of 1.01, 0.96, 0.91 times, and dynamic PE of 15, 13, and 12 times, respectively.
Risk warning: The downward pressure on the economy has increased; market share base transaction activity has declined sharply; and the stock market has declined sharply.