Core views:
Earnings for the first quarter of '24 highlighted resilience. In 2023, revenue was 6.517 billion yuan, +35.03% YoY; net profit to mother was 2,252 billion yuan, +48.43% YoY. 24Q1 achieved operating income of 1.41 billion yuan, -21% year over year; net profit to mother of 456 million yuan, -7.68% year over year; net profit after deducting non-return to mother of 421 million yuan, -2.81% year on year. After 24Q1, the adjusted leverage ratio increased to 3.45 times, an increase of 0.27 over the previous year.
Competitive advantages in wealth and asset management are prominent, and investment banks can be expected to gain strength. ① Brokerage business revenue of 1,199 billion yuan in 2023, +1% year-on-year, mainly contributed to a high increase in trading seats. Revenue from consignment financial products was 192 million yuan, +8% over the same period, accounting for 16% of the brokerage business. The scale of securities, custody, fund investment, etc. developed rapidly, exploring the private banking business, and the number and quality of customers both increased. ② The asset management business achieved revenue of 1,553 billion yuan in 2023, +1% year over year; 24Q1 +2% year over year. At the end of 2023, the size of CaiTsu Asset Management and CaiTong Fund was +12% and +21% year-on-year. ③ The investment banking business achieved revenue of 761 million yuan in 2023, +68% year over year; 24Q1 -8% year over year. Continuing to be deeply involved in Zhejiang and led by company leaders, the market share of equity underwriting increased from 0.09% in 2017 to 0.61% in 2023. The number of IPO advisors in 2023 was the highest in the province, and the scale of bond underwriting increased 79% year-on-year.
The asset-heavy business is relatively stable. 2023 ① Proprietary investment income was 1.375 million yuan, turning a loss into a profit compared to a loss of 16 million yuan in 2022. Among them, the share of stock investment was stable, the share of derivative financial assets increased from 0.3% to 1.9%, and the increase in OTC derivatives was +150% year-on-year. ② Capital intermediary revenue of 921 million yuan, +0.63% year over year, of which interest income from the two loans was 1,026 million yuan, -7.3% year over year; interest income from purchases and resale was 162 million yuan, +31% year over year. 2024Q1 investment income (including fair value) reached 485 million yuan YoY as the main drag, mainly due to market fluctuations due to income swaps and losses and base effect.
Profit forecasting and investment advice. The internal stability of the capital market has improved. As a brokerage firm in Zhejiang Province, the company's shareholder background enhances growth potential, regional vitality unleashes operating momentum, outstanding comprehensive wealth and asset management advantages, and investment banks are making efforts to serve high-quality enterprises in Zhejiang Province. The company's net assets are expected to be 7.79/8.12 yuan per share in 2024-2025. Given 1.0-2.1 times the PB hub in the past three years, the reasonable value of A shares is 9.35 yuan/share, maintaining a “buy” rating.
Risk warning. The economic downturn exceeded expectations, industry policy changes, and fluctuations in equity and bond markets caused performance to fall short of expectations, etc.