Introduction to this report:
The decline in investment returns under a high base has put pressure on performance; it is expected that supply-side reforms in the industry will accelerate, and the company's advantages in retail and institutional service specialization will continue to be consolidated under the power of technology. It is expected to become stronger and better through endogenous growth and epitaxial development.
Key points of investment:
Maintain the “overholding” rating and maintain the target price of 21.76 yuan/share, corresponding to 15.09xPE and 1.04xPb in 2024. The company's 2024Q1 revenue/net profit to mother was 61.05/2,291 billion yuan, -32.11%/-29.39%; the weighted average ROE was -0.49pct year-on-year to 1.37%, and the performance was lower than expected. Considering the acceleration of supply-side reforms in the industry, the company's advantages in retail and institutional service specialization are continuously consolidated under the power of technology, and it is expected to strengthen and excel through endogenous growth and epitaxial development. The maintenance profit forecast is 24-26 EPS of 1.44/1.61/1.78 yuan. Maintain the target price of 21.76 yuan/share, corresponding to 15.09xPe and 1.04xPb in 2024, and maintain the “increase” rating.
The decline in investment income has put pressure on performance, mainly due to the year-on-year decline in return on investment under a high base, compounded by a contraction in the scale of OTC derivatives and other businesses. The net revenue from the company's investment business was -60.98% to 2.02 billion yuan, accounting for -104.25% of the adjusted revenue (operating income - other business expenses) increase, putting pressure on performance; the main reason for the decline in investment business was the year-on-year decline in return on investment compared to 2023Q1 in the volatile market, compounded by the contraction in business scale such as OTC derivatives. The return on investment was -0.80pct to 0.46% year over year, and the size of financial assets was -2.24% year-on-year in 2023Q1 to 438.60 billion yuan.
It is expected that supply-side reforms in the industry will accelerate, and the company will continue to consolidate its advantages in retail and institutional service specialization, empowered by technology. It is expected to become stronger and better through endogenous growth and epitaxial development. Supply-side reforms in the industry are expected to accelerate. The State Council said it will concentrate its efforts on building a “national team” for the financial industry to promote the strengthening and excellence of large state-owned financial enterprises. The company has leading fintech capabilities, continuously empowering and improving digital wealth management service capabilities, institutional customer platform-based service capabilities, comprehensive corporate customer service capabilities, cross-border integrated financial service capabilities, etc. Retail and institutional customer service capabilities continue to improve, and its competitive advantage continues to be consolidated. It is expected to become stronger and better through endogenous growth and epitaxial mergers and acquisitions.
Catalyst: Supply-side reforms in the industry are advancing at an accelerated pace.
Risk warning: The equity market fluctuates greatly. Supply-side reforms in the industry have fallen short of expectations.