Event: On April 26, Societe Generale Securities announced its 2023 Annual Report and 2024 Quarterly Report. In 2023, it achieved net profit of 1.96 billion yuan/yoy -26%, and achieved revenue of 10.63 billion yuan/yoy -0.3%; 1Q24 achieved net profit to mother of 330 million/yoy -60%, achieving revenue of 2.38 billion yuan/yoy -43%.
The main income of securities fell slightly in '23, and the decline in 1Q performance was mainly due to obvious pressure on the investment business. The main revenue of the company's securities in '23 was 8.65 billion yuan/yoy -9%. 1) The main revenue split for 23 years: brokerage, investment banking, asset management, other fees, net interest, net investment realized income of 22.5, 10.4, 1.5, 27.0, 18.2, and 6.2 billion, respectively, compared with -18%, +9%, -8%, -17%, -5%, and +78%; 2) 23-year revenue composition: brokerage accounts for 26.1%, investment banks account for 12.1%, asset management accounts for 1.7%, other fees account for 31.3%, net interest accounts for 21.1%, net investment accounts for 7.1%, and net investment accounts for 7.1%. 3) 1Q24 main revenue split: 1Q24 brokerage, investment banking, asset management, other fees, net interest, net investment realized revenue of 4.7, 1.2, 0.4, 5.4, 2.8, and 330 million, respectively, -23%, -69%, +10%, -27%, -44%, and -68%, respectively.
Higher management fee ratios are dragging down profits. In '23, the company made restorative investments in travel meetings, customer marketing, information technology investment, etc.; in '23, the company's business and management expenses were 5.80 billion/ yoy +3%, and the management expense ratio (management fee/main income from securities) was 67.1% /yoy+8.3 pct, and the 1Q24 management expense ratio further increased to 75.9%.
Investment leverage and operating leverage expanded steadily in '23, and declined slightly in the first quarter. 1) Year 23: At the end of 23, the company's total assets were 273.6 billion yuan/yoy +11%, net assets 56.4 billion yuan/yoy +8%, operating leverage 3.73x/yoy+0.39x; at the end of 23, investment assets were 129.7 billion yuan/yoy +35%, investment leverage 2.30x/yoy+0.46x. 2) First quarter of '24: Total assets at the end of 1Q24 was 251.9 billion yuan/-8% compared to the beginning of the year, net assets of 56.8 billion yuan/+1% compared to the beginning of the year, operating leverage of 3.45x/-0.28x compared to the beginning of the year; investment assets at the end of 1Q24 were 127.2 billion/ -2% compared to the beginning of the year, investment leverage 2.24x/-0.06x compared to the beginning of the year.
The company's brokerage business declined with the market in '23, and the market share of the two finance companies stabilized. 1) In terms of securities brokerage business:
In '23, the company's stock base transaction volume was 6.7 trillion yuan/yoy -9%, and the market share was 1.39% /yoy-0.08pct; net revenue from the purchasing agency business was 1.77 billion yuan/yoy -14%, and net revenue from the consignment business was 350 million/yoy -27%. 2) In terms of futures brokerage business: Xingzheng Futures continued to improve the customer service system and strengthen institutional customer coverage in 23 years. At the end of '23, Xingzheng Futures customer equity reached 30.9 billion yuan/yoy -6%, achieving a net revenue of 130 million yuan/yoy -38% from the futures brokerage business. 3) In terms of the two finance business: the company's two finance business revenue in '23 was 1.82 billion yuan/yoy -6%, and the financing scale at the end of '23 was 30 billion yuan/yoy +5%, with a market share of 1.82% /yoy-0.04pct; at the end of 1Q24, the company's financing scale was 28.4 billion yuan/yoy +5%, with a market share of 1.84% /yoy+0.03pct.
The share of public offering business line profits increased to 45%. In terms of performance, in 2023, due to the continued downturn in the fund market and the reform of public fund fees, the company's other fee revenue (mainly fund management business) was 2.70 billion yuan/yoy -17%, and the total contribution from the public offering business went to net profit of 800 million/yoy -14%, accounting for 45% /yoy+6.22pct; 1Q24, the company's other fee revenue was 540 million/yoy -27%. Specifically, the net profits of Xingzheng Global Fund and China Southern Fund in 23 were 1.37 billion yuan and 2.01 billion yuan respectively, -19% and +14% year-on-year respectively. In terms of asset management scale, 1Q24 Mo Xing Quan Fund's non-cargo base at the end of the period was 272.5 billion/ -1% from the end of '22, ranking 19 in the industry/down 2 places from '22; China Southern Fund's non-cargo base at the end of the period was 538 billion/ +10% from the end of '22/ +4% from the end of '22, ranking 8th in the industry/down 2 places from '22.
Investment Analyst Opinion: Maintaining the “Highly Recommended” rating. The estimated net profit of 2024-2026E Societe Generale Securities will be 2.02 billion yuan, 2.15 billion yuan, and 2.43 billion yuan, respectively, +3%, +6%, and +13% compared with the same period last year.
The 4/26 closing price corresponds to 24-26E dynamic PB 0.86, 0.84, and 0.82x, respectively.
Risk warning: The downward pressure on the economy is increasing; the activity of stock transactions in the market has declined sharply; the process of residents' capital entering the market has slowed down.