Description of the event

The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 6.517 billion yuan, a year-on-year increase of 35.0%, and net profit to mother of 2,252 billion yuan, an increase of 48.43% over the previous year. The weighted average ROE was 6.67%, an increase of 1.71 pct over the previous year. The first quarter of 2024 achieved operating income of 1,410 million yuan, a year-on-year decrease of 21.03%, and realized net profit of 456 million yuan, a year-on-year decrease of 7.68%.

Incident reviews

Proprietary performance was outstanding, and the asset-light business was very resilient. The company's own business achieved revenue of 1,757 billion yuan in 2023. Affected by the low base effect in 2022, the year-on-year increase was 10.56 times, which is the main source of revenue growth for the company. The asset-light business showed strong resilience. Among them, brokerage business revenue was 1,199 billion yuan, up 1.34% year on year, asset management revenue was 1,553 billion yuan, up 6.37% year on year, and investment banking business bucked the trend and achieved revenue of 761 million yuan, an increase of 68.44% year on year. The performance of the Q1 asset-light business was divided. The brokerage business achieved revenue of 297 million yuan, an increase of 8.24% year on year, the asset management business achieved revenue of 319 million yuan, an increase of 2.00% year on year, the investment banking business was affected by the slowing pace of IPOs, revenue fell 8.01% year on year, and Q1 achieved revenue of 141 million yuan.

Building the No. 1 project, the investment banking business bucked the trend. The company takes building a first-class modern investment bank as the “No. 1 project”, adheres to the strategy of deepening Zhejiang, and strengthens internal and external collaboration and resource connections. The equity financing scale in 2023 was 5.603 billion yuan, up 106.68% year on year. The number of IPOs completed was 6, and the scale was 4.128 billion yuan, up 375.58% year on year. The number of IPOs in Zhejiang Province was 5, ranking first in the province. In 2023, the debt financing scale was 126.647 billion yuan, up 85.38% year on year, and corporate bond underwriting scale was 102,564 billion yuan, up 68.18% year on year.

Institutionalization+comprehensive reforms promote steady and far-reaching wealth management. The company promotes further comprehensive branch reform and business institutional transformation, and the wealth management transformation is progressing steadily. At the end of the year, the number of parent company customers exceeded 3.26 million, a year-on-year increase of 14%, and customer assets increased to 779.5 billion yuan. The company strengthened the construction of a comprehensive financial service platform for institutions, built Caitong Enjoyed, and achieved seat rental revenue of 195 million yuan, an increase of 199.78% over the previous year; innovative securities, escrow and investment businesses developed rapidly, and the scale of fund investment business contracts increased 67%. Sales of a total of rich products increased 80% year over year, and fund consignment revenue of 192 million yuan, an increase of 7.75% year on year.

The brokerage asset management industry is leading, and the scale of CaiTong Fund has grown. CaiTong Asset Management actively promoted the FICC business and enriched “+ strategies”. By the end of 2023, the asset management scale reached 276.5 billion yuan, an increase of 12% over the previous year, far exceeding the industry (industry growth rate -9%). Among them, the size of non-commodity funds was 98.1 billion yuan, an increase of 13% over the previous year.

Caitong Fund actively promoted business transformation. The total asset size at the end of the year was 134.048 billion yuan, up 20.55% year on year, far higher than the industry's 5.8%. CaiTong Fund's fixed increase business remained at the top of the market. In 2023, 162 new products were added, and it participated in 199 fixed growth projects, with a cumulative participation amount of 28.069 billion yuan.

Investment advice

The company is deeply involved in Zhejiang and Zhejiang enterprises. The management has rich experience, and has expanded a high-quality team. Under the new strategic cycle, its ability to serve residents' wealth management and the real economy continues to improve, and promote the company's development into a new cycle through market-based institutional mechanisms. The company is expected to achieve operating revenue of 7.093 billion yuan, 7.848 billion yuan and 8.822 billion yuan respectively from 2024 to 2026. Net profit attributable to mother was 2.50 billion yuan, 2,810 billion yuan, and 3.244 billion yuan, up 11.03%, 12.38%, and 15.79%; PB was 1.03/0.98/0.97, respectively, maintaining a “buy-A” rating.

Risk warning

The risk of downward fluctuations in the financial market may lead to a sharp drop in the price of financial assets, a decrease in the fair value of financial assets held by the company, and at the same time, directional investment may cause losses due to fluctuations.

Business progress falls short of expected risks. Under the trend of high-quality development in the securities industry, ability to practice and quality of practice have become important influencing factors in business promotion. Facing strict industry supervision, the company's business progress may slow down, thereby affecting the company's performance.

There is a risk of major risky events. Securities companies have various risks such as liquidity risk, market risk, credit risk, operational risk, and reputation risk during the operation process. After the risk occurs, it may have a huge impact on the company's performance.