Matters:
In '23, we achieved operating income of 23.82 billion yuan (-31.5% YoY), operating income of 1.87 billion yuan (-20.4% YoY) based on the net amount method (after deducting other business costs), and net profit of 730 million yuan (+8.3% YoY).
24Q1 achieved operating income of 4.34 billion yuan (-19.1% YoY), operating income of 4.4 billion yuan (-15.5% YoY), net profit to mother of 80 million yuan (-62.6% YoY), and net assets to mother of 12.47 billion yuan (+0.6% compared to the beginning of the period, +4.4% compared to the end of '22).
Commentary:
The margin trading business dragged down performance. The company's risk management business is mainly based on margin trading (average revenue contribution ratio of 99.8% in 22-23), and revenue from sales of goods fell sharply to 22.14 billion yuan in 23 (-32.8% year over year), putting pressure on revenue. Due to extremely low profit margins on spot purchases and sales, net profit performance is superior to revenue. Under the net amount method (after deducting other business costs), the company's revenue for 23 years was 1.87 billion yuan (-20.4% year over year). Among them, handling fees/interest/risk management (net amount method) /investment income was $7.6/6.8/23/130 million yuan, -3.8%/+5.5%/-60%/-59.0% year-on-year.
Futures agency turnover declined, and customer equity rose against the market. Using the parent company as its caliber, the company's net income from domestic brokerage fees in '23 was 450 million yuan (-7.8% YoY), mainly dragged down by domestic agent futures trading volume falling to 15.9 trillion yuan (-1.1% YoY/+6.3% YoY); net domestic interest income of 5.3 billion yuan (-14.7% YoY), and customer equity of 45.732 billion yuan at the end of the year (+0.4% YoY). Although the growth rate was higher than that of the industry, the high increase in interest expenses (+50.4% YoY) led to a decline in net interest income.
Overseas business is growing at an impressive rate. The company relies on its wholly-owned subsidiary Xinyongan Financial Holdings and its subsidiaries to carry out overseas business. Reducing the parent company's statement caliber from consolidated statements, net overseas interest income in '23 was 140 million yuan (+727.5% YoY), and the contribution to total net interest income increased sharply to 21.4% (+18.6pct year over year). Net revenue from overseas fees and commissions was 220 million yuan (+47.1% YoY), contributing 29.6% (+10.2% YoY) to total fees and net commission revenue. The volume of overseas business was boosted by a sharp rise in volume and price: at the end of '23, foreign customer equity of US$583 million (+20.5% YoY), compounded by the Federal Reserve's interest rate hike, which led to an increase in margin interest income.
Q1 results declined slightly due to falling exchange rebates and interest rates. Under the net value method, the company's Q1 revenue was 400 million yuan (-15.5% y/month-on-month +22.3%). Among them, fee/interest/risk management (net amount method) /investment income was 1.1/1.3/0.1/170 million yuan, -28.5%/-25.2%/-75.7%/+83.6% YoY, and -33.0%/-75.7%/+220.1% YoY. Net interest income declined due to a combination of reasons such as a decline in handling fee revenue or a decrease in exchange rebates. The decline in market interest rates led to a decrease in net interest income. By the end of Q1, the company's customer capital was RMB 34.34 billion (-21% YoY/-24.2% month-on-month), and the customer capital conversion rate (net revenue from handling fees and commissions/average customer capital size) in a single quarter fell to 0.28% (-0.07pct/month-on-month -0.12pct), a new low in 23 years.
Investment advice: The company is a leader in the futures industry, traditional futures brokerage business is stable, and innovative businesses such as risk management are expected to enjoy the dividends of the futures market expansion. Considering that the futures industry's recovery fell short of expectations, the profit forecast was lowered.
2024/2025/2026 EPS forecast: 0.53 /0.59/0.70 yuan (pre-2024/2025 value 0.68/0.81 yuan), BPS forecast: 8.88/9.29/9.77 yuan, ROE: 5.9%/6.4%/7.1%. The current stock price corresponds to PE 24.94/22.27/18.93 times, respectively. We maintain Yongan Futures' 2024 performance 29 times PE valuation, corresponding to a target price of 15.3 yuan, and maintain a “recommended” rating.
Risk warning: capital market fluctuations; futures brokerage business commission rate decline; uncertainty about exchange revenue reduction