Matters:

Huatai Securities released its first quarterly report, with total revenue of 6.105 billion yuan (-32.11% YoY/-34.69%) and net profit of 2,291 billion yuan (YoY -29.39% /Q-27.61%). The company's net assets returned to the mother of 181,509 billion yuan (+1.34% compared to the beginning of the period).

Commentary:

Revenue side performance is relatively balanced, and cost control effects are evident. Q1 revenue split: Broker/investment banking/asset management/credit/ investment business revenue was 13.6/5.8/11.1/2.3/940 million yuan, respectively, -11.4%/-26.1%/+10.2%/-23.3%/-85.14%, respectively, contributing 22.2%/9.4%/18.1%/3.8%/15.4% to revenue. The company's brokerage and asset management business is relatively stable, and the brokering+asset management business contributes about 40% of the performance.

Asset-light business: The brokerage and investment banking business is under pressure, and the asset management business has performed well.

1) Q1 The company's net revenue from handling fees and commissions was $3.33 billion (-8.6% YoY/-5.70% YoY). The average daily turnover of A-shares was 895.37 billion yuan (+1.9% YoY +7.5%), and the company's net brokerage fee revenue was 1.36 billion yuan (-11.4% YoY/+1.9% YoY), which is basically in line with the direction of change in the industry. The company's net income from investment banking fees was 580 million yuan (-26.1% YoY/-22.73% YoY), and the debt burden was 172,236 billion yuan, +3.67% YoY.

2) Benefiting from active management transformation, the asset management business continued to grow: net revenue from asset management fees in the first quarter was 1,106 billion yuan (+10.2% year over year).

Capital heavy business is under pressure: Proprietary business contributes to the main increase in performance.

Q1 Proprietary business revenue of 1.88 billion yuan (YoY -58.9% /YoY -83.9%). The financial investment scale was 476.568 billion yuan (YoY +7.3% /month-on-month -1.05%), and the average return on proprietary investment in a single quarter was 0.39% (-0.6 pct/month-on-month -2.06pct).

Investment advice: After regulation optimizes risk control indicators, the company is expected to expand its inventory and increase ROE space. We maintain our profit forecast. The company's 2024/2025/2026 EPS is 1.48/1.70/2.08 yuan, and BPS is 18.15/19.32/20.76 yuan respectively. The current stock price corresponds to PB of 0.76/0.71/0.67 times, respectively, and ROE of 8.16%/8.78%/10.04%, respectively. The company was given a PB valuation of 1 times 2024, corresponding to a target price of 18.15 yuan, maintaining the “recommended” rating.

Risk warning: financial regulatory risks; declining market trading volume; declining risk appetite; capital market innovation falling short of expectations; real economic recovery falling short of expectations.