Core views:
The 24Q1 profit retracted under a high base. The company's revenue in 2023 was 10.627 billion yuan, -0.31% year-on-year; net profit to mother was 1,964 billion yuan, or -25.51% year-on-year. 24Q1 revenue was 2.377 billion yuan, -43.0 percent year on year; net profit to mother was 328 million yuan, -60% year over year.
The 24Q1 adjusted leverage ratio fell to 3.18 times, down 0.26 from the beginning of the year.
Affected by the market, the asset-light business declined slightly: (1) In 2023, brokerage revenue was 2.253 billion yuan, -18% year-on-year, of which revenue from consignment financial products was 413 million yuan, -12% year-on-year, accounting for 18% of the brokerage business; 24Q1 brokerage revenue fell 23%. (2) Net income from the asset management business in 2023 was -8.1%, and net income of funds was -17%. Under the complementary layout, Xingzheng Asset Management consolidated the foundation of fixed income products, and the management scale continued to rise, +13% year-on-year, reaching 84.4 billion yuan; the subsidiary Xingzheng's global net profit was 1,369 billion yuan, -19% year-on-year. 24Q1 asset management revenue was +9.1% year-on-year. (3) Net income from investment banking business in 2023 bucked the trend and reached 1,044 billion yuan, and net revenue from investment banking business in 24Q1 was -69%.
The pan-proprietary business fluctuated greatly: (1) In 2023, the company achieved proprietary investment income of 765 million yuan, an increase of 11% over the previous year. Financial investment assets totaled 125.4 billion yuan, +33.2% year over year; of these, the share of equity investment rose to 12.2%, and the share of derivative financial assets rose to 2.1%. 2024Q1 investment income (including fair value) fell 68% year over year to 336 million yuan. (2) Net interest income (after adjustment) of 1,657 billion yuan was achieved in 2023, +2% year-on-year. Among them, interest income from securities financing was 1,824 billion yuan, a year-on-year decrease of 3.9%. Net income from 24Q1 interest was $278 million, -44.3% year-on-year, mainly due to a year-on-year increase in bond interest and sell-back interest expenses.
Profit forecasting and investment advice. The internal stability and investability of the capital market is gradually improving. Under the development trend of commercialization and institutionalization, the company is expected to maintain its asset management advantage and further enhance institutional customer service capabilities and wealth management capabilities under collaborative empowerment. EPS is expected to be 0.30 or 0.33 yuan/share in 2024. Given 0.9-1.8 times the PB center in the past five years, a reasonable value of 1.2 times PB will be given in 2024. The reasonable value is 7.78 yuan/share, maintaining a “buy” rating.
Risk warning. The economic downturn has exceeded expectations, and fluctuations in the equity and bond markets have led to performance falling short of expectations, and the public's unwillingness to invest.