Overview of the 2023 Annual Report: Caitong Securities achieved operating income of 6.517 billion yuan in 2023, +35.03% year over year; realized net profit of 2,252 billion yuan, +48.43% year over year; basic earnings per share of 0.48 yuan, +41.18% year over year; weighted average return on net assets of 6.67%, +1.71 percentage points year on year. It is proposed to pay $1.00 (tax included) in 2023.

Comment: 1. In 2023, the share of the company's investment banking business net revenue and investment income (including changes in fair value) increased, and the share of net income from brokerage, asset management, and interest declined. 2. The number of institutional clients and asset size grew rapidly, the share of institutional clients' business revenue increased, and the net revenue from consolidated brokerage services was +1.35% compared to the same period. 3. The scale of equity financing and underwriting amounts of various types of bonds simultaneously achieved significant growth. Net income from handling fees from consolidated investment banking operations was +68.36% year-on-year. 4. The scale of brokerage asset management continued to grow against the market, and the net revenue from handling fees for consolidated asset management operations was +6.37% year-on-year. 5. Equity self-employment obtained excess income compared to the index. The overall performance of fixed income self-employment significantly led the benchmark index, and consolidated investment income (including changes in fair value) was +165.67% year-on-year. 6. The balance of the two loans increased slightly, and the share pledge scale of its own funds grew rapidly. Net income from consolidated interest was -27.85% compared to the same period last year.

Investment advice: During the reporting period, the company's net brokerage fee revenue bucked the trend. Investment banking business equity and bond financing bucked the trend. The asset management business's ability to actively manage risk remained at the forefront of the industry. Equity investment effectively controlled risk, and fixed income self-management seized market opportunities to drive a significant recovery in investment income (including changes in fair value).

The company is rooted in Zhejiang Province, covering the Yangtze River Delta and covering the whole country. It has significant regional market advantages among small and medium-sized brokerage firms, and its characteristic competitive advantage is constantly increasing. The company's 2024 and 2025 EPS is expected to be 0.41 yuan and 0.48 yuan, respectively, and the BVPS will be 7.62 yuan and 7.96 yuan respectively. Based on the closing price of 7.73 yuan on April 26, the corresponding P/B will be 1.01 times and 0.97 times, respectively, maintaining an investment rating of “increase in holdings”.

Risk warning: 1. The weakening equity and fixed income market environment has led to a decline in the company's performance; 2. Risk of market fluctuations; 3. The policy effect of capital market reform falls short of expectations