On the evening of July 8th, four brokerage firms including Shouchuang Securities and Hongta Securities released their 2024 half-year performance forecasts, becoming the first listed brokerages to disclose their performance to the market.

Specifically, three of the four brokerages saw a significant increase in net profit in the first half of the year, whereas Guangdong Golden Dragon Development Inc. did not make a profit, but its losses were significantly narrowed.

As a result of this news, the brokerage sector rose today, with Hongta Securities up more than 5%, Dongxing Securities up more than 2%, and Shouchuang Securities, Caitong Securities, Huatai Securities, and others following suit.

The non-banking team of Swhy Securities analyzed that the main business income and net profit of the brokerage sector are expected to continue to decline year-on-year and improve quarter-on-quarter, with a significantly narrower year-on-year decline than in the first quarter. From a business perspective, self-employed brokerage is still the main driver of brokerage performance in the first half of the year, expected to contribute 41% of the main business income of the brokerage sector.

Four brokerages are expected to have positive half-year reports.

Brokerages have already announced their 2024 half-year performance forecasts. On July 8th, Hongta Securities announced that it expects its net profit attributable to shareholders to be approximately 449 million yuan in the first half of 2024, a year-on-year increase of 52.27%.

Dongxing Securities expects to achieve a net profit attributable to shareholders of 530 million yuan to 630 million yuan in the first half of 2024, a year-on-year increase of 51.47% -80.05%. Regarding the reasons for the growth in performance during the reporting period, the company stated that the investment performance of the company has greatly increased, resulting in a significant increase in the overall operating performance of the company year-on-year.

Shouchuang Securities expects to achieve a net profit attributable to owners of the parent company of 455 million yuan to 495 million yuan in the first half of 2024, an increase of 65.44% -79.98% year on year.

Guangdong Golden Dragon Development Inc. expects to report a net loss attributable to shareholders of the listed company of 37.9 million yuan to 72.9 million yuan for the first half of 2024, with a narrower year-on-year loss. This is mainly due to Zhongshan Securities, a subsidiary of the company, which is expected to achieve a significant growth in self-operated business income year-on-year, and its net profit will turn around from loss to profit.

From the statements of the four brokerage firms predicting performance growth during the reporting period, the growth of self-operated business income is the main reason.

Hongta Securities pointed out that during the reporting period, the company continued to optimize its asset-liability structure, further enhance the scientific and effective allocation of assets, achieved obvious results, and thus realized a year-on-year increase in the overall operating performance of the company.

Dongxing Securities stated that in the first half of 2024, the company deepened its strategic transformation, refined its differentiated characteristics, adhered to the concept of absolute returns, actively promoted the steady development of various businesses. During the reporting period, the investment performance of the company greatly increased, resulting in a significant increase in the overall operating performance of the company year-on-year.

Guangdong Golden Dragon Development Inc. pointed out that during the reporting period, Zhongshan Securities, a subsidiary of the company and its majority-owned company, achieved a significant growth in self-operated business income year-on-year and net profit turned from loss to profit. Influenced by this, the company's operating income increased significantly year-on-year, and its net loss decreased compared to the same period last year.

Shouchuang Securities stated that in the first half of 2024, the company closely focused on the annual business plan, focused on its main responsibilities and business, adhered to both "stability" and "enterprising" drivers, took business development as the center, continued to consolidate the core advantages of differentiated asset management services and fixed-income investment and trading businesses, promoted the transformation and breakthrough of various businesses, strengthened compliance and risk management, created differentiated and specialized core competitiveness, and promoted the company's business management to a new level.

Valuations have approached historical lows.

Affected by the fluctuations in the A-share market, the brokerage sector, which has always been regarded as the "leader of the bull market," has performed poorly.

According to Central China Securities, since 2024, the average P/B of the brokerage sector has reached a high of 1.273 times and a low of 1.053 times, with the overall operating range moving down to a low point since 2016. As of the close of July 5th, the average P/B of the brokerage sector was 1.054 times, approaching the historical low of 1.024 times in October 2018.

From the sell-side research, it can also be seen that they are more cautious about the brokerage sector. Research reports from several companies show that the rating of the brokerage sector is shareholding, holding or neutral, and no rating such as buy or strong recommendation has been seen.

Looking ahead, China Merchants Securities pointed out that recently, the three major indices returned to the "starting point" at the beginning of the year, and the daily trading volume reappeared, stock equity financing was restarted, but the pace has not returned to normal. The overall performance of the brokerage sector is under pressure. At the valuation level, the brokerage PB has dropped to 1.08 and the PB percentile has fallen to the lowest range since listing. At present, under the pessimistic sentiment, the brokerage sector is oversold, and both PB and public fund holdings are at historical lows. The sector investment is relatively risky, and it is recommended to seize the opportunity to layout on the left side of the sector.

Huaxi Securities also believes that on the valuation side, the current overall PB ratio of the brokerage sector is 0.97 times the market-to-book ratio, and the PB valuation of the securities index is 1.25 times, which is in the 0.02% percentile in the past 10 years and has great configuration value. Among the 54 listed brokerage firms (or participating brokerage firms), 24 have a market-to-book ratio lower than 1, and 35 have a market-to-book ratio in the lowest 1% percentile in the past decade.

Bullish on the securities industry as an intermediary function for new quality production financing and long-term patient capital allocation services; bullish on the direction of increasing the proportion of resident equity assets (especially ETF investments) allocation.