Matters:
Guolian Securities announced plans to issue shares to purchase assets and raise supporting capital and related transactions. On May 12, 2024, Guolian Securities issued an announcement stating that the company plans to use 11.31 yuan/share to purchase 100% of its total shares in Minsheng Securities from 46 counterparties, including the League of Nations Group and Fengquanyu, and plans to issue shares to no more than 35 specific investors, raise no more than 2 billion yuan in supporting capital, and issue no more than 250 million A-shares to be used for Minsheng Securities business development.
Guoxin AfDB's opinion: 1) The transaction paid the transaction consideration by issuing A shares. The issue price was 11.31 yuan/share. The issue price was 8.13% higher than the closing price of 10.46 yuan/share on the trading day before the suspension of trading (April 25). The pricing reflects good expectations for long-term consolidation. 2) After the merger of the League of Nations and Minsheng Securities, it is expected to rank among the top 20 in the industry. Based on data from the end of 2023, the net assets of Guolian Securities are 181 billion yuan; the net assets of Minsheng Securities are 15.8 billion yuan. In addition to supporting capital raising, the consolidated net assets will rank among the top 20 in the industry. 3) There are opportunities for integration between brokerage and investment banking businesses. The investment banking business has always been the dominant business of Minsheng Securities. From 2021 to 2023, the investment banking business accounted for 43%/63%/56% of revenue, respectively. According to Wind data, in 2023, Minsheng Securities issued and listed 20 IPOs, ranking 5th in the industry, with a market share of 5.65%; a total of 20.067 billion yuan was raised, with a market share of 5.59%. In the same period, Guolian Securities issued and listed 4 IPOs, ranking 22nd in the industry, with a market share of 1.13%; a total of 2,368 billion yuan was raised, with a market share of 0.66%. From a regional perspective, Minsheng Securities branches focus on covering the Henan region, while Guolian Securities mainly has a relatively high market share in Wuxi and southern Jiangsu. The merger of Guolian Securities with Minsheng Securities will create certain complementary advantages. 4) Our profit forecast for the company remains unchanged. The estimated net profit for 2024-2026 is 8.8/10.1/1.09 billion yuan, up 30.3%/15.5%/7.9% year on year. The PE corresponding to the current stock price is 39.5/34.2/31.7x, and the PB is 2.0/2.0/1.9x. Capital market reforms continue, brokerage firms continue to strengthen public equity management business, actively increase strategic layout, and continuously improve the company's overall strength and ROE. We maintain the company's “buy” rating.
Commentary:
On May 12, 2024, Guolian Securities announced plans to issue shares to purchase assets and raise supporting capital and related transactions. On May 12, 2024, Guolian Securities issued an announcement stating that the company plans to purchase 100% of its total shares held by Minsheng Securities from 46 counterparties including the League of Nations Group and Fengquanyu, and plans to issue shares to no more than 35 specific investors, raising no more than 2 billion yuan in supporting capital, and issuing no more than 250 million A-shares, intended for Minsheng Securities business development.
The payment transaction price is 11.31 yuan/share. The pricing reflects long-term consolidated expectations. According to the announcement, the pricing reference date for issuing shares to raise supporting capital in this transaction is the first day of the issuance period. The issue price is not lower than 80% of the average stock transaction price for the 20 trading days before the pricing benchmark date for raising supporting capital, and not lower than the net assets per share per share attributable to common shareholders of the parent company in the latest audited phase of the company before this issuance. The transaction paid for the transaction consideration by issuing A shares, and the issue price was 11.31 yuan/share. The issue price was 8.13% higher than the closing price of 10.46 yuan/share on the trading day before the suspension of trading (April 25).
The League of Nations and Minsheng Securities are expected to rank among the top 20 in the industry after merging
Based on data from the end of 2023, the net assets of Guolian Securities are 181 billion yuan; the net assets of Minsheng Securities are 15.8 billion yuan. In addition to supporting capital raising, the consolidated net assets will rank among the top 20 in the industry.
There are opportunities for integration between brokerage and investment banking businesses
In 2023, Guolian Securities achieved operating income of 2,955 billion yuan, an increase of 12.68% over the previous year; realized net profit of 671 million yuan, a year-on-year decrease of 12.51%. The revenue mainly came from brokerage business and investment business. From 2021 to 2023, brokerage business accounted for 21%/21%/17% of revenue, respectively, and investment business accounted for 47%/44%/42%.
In 2023, Minsheng Securities's operating income was 3,799 million yuan, up 50% year on year; net profit to mother was 681 million yuan, up 222.68% year on year.
The investment banking business has always been the dominant business of Minsheng Securities. From 2021 to 2023, the investment banking business accounted for 43%/63%/56% of revenue, respectively.
According to Wind data, in 2023, Minsheng Securities issued and listed 20 IPOs, ranking 5th in the industry, with a market share of 5.65%; a total of 20.067 billion yuan was raised, with a market share of 5.59%. In the same period, Guolian Securities issued and listed 4 IPOs, ranking 22nd in the industry, with a market share of 1.13%; a total of 2,368 billion yuan was raised, with a market share of 0.66%. From a regional perspective, Minsheng Securities branches focus on covering the Henan region, while Guolian Securities mainly has a relatively high market share in Wuxi and southern Jiangsu. The merger of Guolian Securities with Minsheng Securities will create certain complementary advantages.
Risk warning
The decline in the market brought uncertainty to brokers' performance and valuation repair; financial supervision became stricter; market competition intensified; innovation fell short of expectations, etc.