Core views:
Performance retracted somewhat under the 24Q1 high base. The company disclosed its 2024 quarterly report. 24Q1 achieved revenue of 7.214 billion yuan, -17% year over year; net profit to mother was 1,631 billion yuan, -27.5% year over year.
Weighted average ROE 1.30%, year-over-year -1.06 pct. The total assets of 2024Q1 amounted to 768.85 billion yuan, +17% year-on-year. Excluding agent payments, the leverage ratio was 4.50 times, down 0.55 from the same period last year.
The investment banking business bucked the trend and grew steadily, and the asset management business structure was optimized and growing steadily. (1) Brokerage business: The average daily transaction volume of the entire market in the first quarter of the industry was +1.9% year-on-year. The company's brokerage business 2024Q1 net revenue was 1,256 billion yuan, -9.8% year-on-year. (2) Investment business: Under the rebalance of Tier 1 and 2 financing, the total equity financing amount in the 2024Q1 market was 110.7 billion yuan (-69% YoY), and the company's investment bank's Q1 net revenue was 95 million yuan, +65% YoY. (3) Asset management business: The company's net revenue from Q1 asset management fees was 109 million yuan, +7.3% over the same period last year. (4) At the end of the first quarter, the market balance of finance was 1537.9 billion yuan, -4% year-on-year. The company's Q1 net interest income was $930 million, -16.9% year-on-year, mainly due to an increase in interest expenses.
Pan-owned businesses are affected by market fluctuations. The 24Q1 Shanghai and Shenzhen 300 rose +3.10% (+4.63% in the same period last year); China Securities Full Debt +2.34% (+0.98% in the same period last year), and the company's 24Q1 investment income (including fair value) was 1,626 billion yuan, -33% year-on-year, mainly due to a decrease in financial instrument investment income due to market fluctuations. In 24Q1, transactional financial assets, derivative financial assets, and derivative financial liabilities were +24%, +227%, and -36%, respectively, focusing on expanding customer demand business.
Profit forecasting and investment advice. Leading brokerage firms are relatively more stable under strict supervision, and have benefited more from building first-class investment banks. The company strives to optimize both retail and institutional customer groups, and continues to upgrade institutionalization and internationalization, and the company is expected to usher in new breakthroughs. The company's net assets are expected to be $12.33/12.90 per share in 2024-2025. Given 0.9-1.8 times the PB core in the past three years, the reasonable value of A shares is 17.26 yuan/share, and the reasonable value of A shares is 17.26 yuan/share. Since the AH premium corresponds to a reasonable value of HK$5.93 per share for H shares, it maintains a “buy” rating.
Risk warning. The economic downturn exceeded expectations, industry policy changes, equity market fluctuations, etc.