Matters:
CITIC Securities released its 2024 quarterly report, achieving operating income of 13.755 billion yuan (YoY -10.4%) and net profit to mother of 4.959 billion yuan (YoY -8.5%). Total assets are 1567.3 billion yuan, and net assets belonging to the parent company are 28.9 billion yuan. EPS (diluted) is 0.33 yuan, BVPS is 17.35 yuan.
Ping An's point of view:
Performance is resilient, and capital use efficiency and operating efficiency have improved. 24Q1 corporate broker/investment banking/asset management/interest/ownership/other net income was -6%/-56%/-6%/-44%/-17%/+122%/+122%, respectively, accounting for 18%/6%/17%/2%/40%/17%. The higher increase in other revenue was mainly due to year-on-year increase in commodity trade sales revenue and exchange rate fluctuations under a low base. After excluding other business revenue, the five major businesses had revenue of 11.5 billion yuan (YoY -19.7%). Expense control on the expenditure side was effective. The 24Q1 management rate was 44.9% (YOY-2.8pct), credit impairment losses were reversed back to 121 million yuan (23Q1 credit impairment losses were calculated at 23Q1), and the net profit margin was 36.05% (YoY+0.75pct).
The efficiency of capital use was further improved. The 24Q1 leverage ratio was 4.52 times (YoY+0.08 times, +0.17 times at the beginning of the year), and the 24Q1 annualized ROE was 7.22% (YOY-1.26pct).
Proprietary businesses are affected by the market, and interest expenses remain high. At the end of 24Q1, the company's self-operating scale was 798.4 billion yuan (YoY +14%, +11% compared to the beginning of the year), but its own revenue was 5.5 billion yuan (YoY -17.4%). It is estimated that equity assets in the company's proprietary market account are relatively high and are greatly affected by the market. In terms of credit business, financing of 114.3 billion yuan was -3.8% compared to the beginning of the year, and -7% of the total market's two loans over the same period (according to Wind), the decline was narrower than that of the market. However, interest costs continued to be high. Interest expenses to pay short-term financing notes and repurchase interest expenses increased year-on-year, with net interest income of 330 million yuan (YoY -44.2%).
The brokerage and asset management business is relatively stable. According to Wind, the average daily share base turnover in 24Q1 was restored to 1021.7 billion yuan (YoY +7%), and the company's net brokerage revenue was 2.44 billion yuan (YoY -5.8%), which is expected to affect the fee rate and pressure on financial product sales. In terms of asset management business, according to the Securities Fund Industry Association, the private equity asset management scale of securities companies and private equity subsidiaries in the entire industry at the end of February '24 was 6.0 trillion yuan (+1% compared to the beginning of the year), the company's 24Q1 net asset management revenue was 2.36 billion yuan (YoY -5.6%), and the subsidiary Huaxia Fund's net profit was 5.2 billion yuan (YoY -5.8%), mainly due to lower management rates. The net asset value of 24Q1 Huaxia Fund Public Fund was 1.45 trillion yuan (YoY +27%, according to Wind).
The investment banking business is affected by policies and continues to be pressured. The investment banking business was affected by policies. According to Wind, 24Q1's IPO underwriting amount was 5.1 billion yuan (YoY -50%), refinancing (allotment+additional issuance) underwriting amount was 9 billion yuan (YoY -89%), and bond underwriting amount was 388.6 billion yuan (YoY +4%), which dragged down the net revenue of the investment banking business of 870 million yuan (YoY -56.1%).
Investment advice: The company's many leading business advantages continue to expand, and comprehensive service capabilities and professional capabilities raise competitive barriers. Recently, the direction of high-quality development in the securities industry is clear. The State Council stated that it will concentrate on building a “national team” for the financial industry and promoting the improvement and strengthening of leading brokerage firms. The attention paid by regulators to the capital market and securities companies has increased markedly. As a leading company in the securities industry, the company's competitive advantage is expected to further improve, and it is optimistic about the company's long-term growth space. Maintain the company's 24/25/26 net profit forecast of 203/223/23.8 billion yuan, corresponding to a year-on-year change of +3%/+10%/+7%. The company's current stock price corresponds to about 1.11 times the 2024 PB, maintaining a “recommended” rating.
Risk warning: 1) The progress of capital market reforms fell short of expectations; 2) monetary policy tightened beyond expectations; 3) The decline in macroeconomic growth exceeding expectations affects market risk appetite.