1Q24 results are in line with our expectations
CITIC Securities announced 1Q24 results: revenue -10.4% YoY/-3.6% YoY to 13.8 billion yuan, net profit to mother -8.5%/+50% YoY to 5 billion yuan, annualized ROAE -1.3ppt/month-on-month +2.2ppt to 7.2%. The results are in line with our expectations. The company's adjusted business and management rate was -0.4ppt to 48.7% year on year; total assets at the end of the period were +8.8% YoY/+7.8% month-on-month, and the self-owned capital leverage ratio was +0.08x/month-on-month +0.17x to 4.52x, maintaining a steady trend of table expansion.
Development trends
Fee business: Total fee revenue was -19%, revenue accounted for -5ppt to 43% year over year; investment banks adjusted with the market, and brokering/asset management was relatively stable. 1) 1Q24 brokerage revenue was -5.8% YoY/+2.2% month-on-month to $2.4 billion, corresponding to: A-share market share base ADT +1.3% YoY /4.7%, Hong Kong ADT -22% YoY/+9% YoY, New Equity Fund issuance volume -42% YoY/-14% month-on-month. 2) Investment banking revenue was -56% YoY/-16% YoY to 870 million yuan; Wind statistics 1Q24's IPO size was -50% YoY/+72% YoY to 5.1 billion yuan, refinancing scale -87% YoY/-76% YoY to 10.8 billion yuan, and bond underwriting scale +5% YoY to -19% YoY to 394.6 billion yuan. 3) Asset management revenue was -5.6% YoY/-3.8% YoY to 2.4 billion yuan, of which Huaxia Fund (holding 62.2%) non-cargo AUM at the end of 1Q24 was +29% YoY/+12% compared to the beginning of the year to 919.5 billion yuan, and net profit -5.8% YoY to 520 million yuan.
Capital business: Total capital revenue was -10% year-on-year, accounting for a slight increase of +0.2ppt to 49%; the bond market improved and effectively balanced equity investment fluctuations. 1) 1Q24 comprehensive investment revenue -7.1% /month-on-month +36% to 6.4 billion yuan, parent company investment business revenue +12% /month-on-month +68% to 5.7 billion yuan; at the end of 1Q24, the company's transactional financial assets were +6.6% YoY /7.7% compared to the beginning of the year to 673 billion yuan, corresponding annualized return on investment -0.8ppt/month-on-month +1.0ppt to 3.9%, 1Q24 stock market fluctuations (Shanghai and Shenzhen 300 +3.1% /GEM index -10.5%), but the overall bond market improved (China Securities Net Index +1.6%). 2) Net interest income for 1Q24 was -44% /-57% month-on-month to $330 million, of which interest income was -1.5% YoY/-1% month-on-month to $5.2 billion, corresponding financing volume +2.1% YoY/-3.8% compared to the beginning of the year to $114.3 billion (vs. market balance -4.3%/-6.8%); interest expenses were +3.9% YoY/+8.3% month-on-month to $4.9 billion, mainly due to the increase in debt size due to table expansion.
Profit forecasting and valuation
The profit forecast for 2024/25 remains unchanged. The company's A/H is currently trading at 2024e 1.1x/0.6xP/B, 2025e 1.0x/0.6x P/B (all excluding perpetual bonds); maintaining the A-share outperforming industry rating and target price of $26, corresponding to 1.5x/1.4x 2024/25e P/B and 36% upward space; maintaining H shares outperforming the industry rating and target price of HK$18.2, corresponding to 0.9x/0.8x 2024/25e P/B and 48% upward space.
risks
Trade volume shrinks, markets fluctuate greatly, and regulatory uncertainty.