Key points of investment

Overview of the data

24H1 Oriental Wealth achieved total operating income of 4.95 billion yuan, down 14.0% year on year; net profit to mother was 4.06 billion yuan, down 4.0% year on year, up 7.6% month on month in 24Q2; weighted average return on net assets was 5.52% (unannualized), down 0.78 pct year on year. The results were in line with expectations. The decline in net profit was less than the decline in revenue, mainly due to a sharp increase in investment income. In terms of revenue structure, securities business revenue accounted for 69% of 24H1's total revenue, mainly due to the continuous increase in the market share of proxy buying and financing businesses.

Consignment sales revenue maintained a large decline

24H1 Oriental Wealth achieved fund consignment revenue of 1.41 billion yuan, a year-on-year decrease of 30%, in line with 24Q1. 24H1's fund sales increased 4.4% year on year, but the drop in consignment revenue was significant. The judgment was due to changes in the structure of consignment products and fund fee changes. ① Structural aspects: Non-monetary fund sales decreased by 1% year on year, accounting for a decrease of 3.1 pct. The scale of fund consignment sales with lower rates increased 13% year on year, accounting for an increase in share. ② The public offering rate reform was officially launched in July 2023. The regulations have mentioned many times to promote a steady reduction in the comprehensive rate rate in the fund industry, and the three-stage rate reform (reduction of trailing commissions) has not yet been implemented. It is expected that the rate may continue to decline.

Increased market share of proxy buying and dual finance

24H1 Oriental Wealth achieved securities business revenue of 3.42 billion yuan, a year-on-year decrease of 5.2%. The average daily share base turnover in the 24H1 market decreased by 8% year on year, but the company's turnover market share increased by 0.05 pct.

24H1 Oriental Wealth achieved net interest income of 1.03 billion yuan, a year-on-year decrease of 8%. At the end of 24H1, the market share of Dongcai's two finance business increased by 0.36 pct year on year and 0.03 pct month on month. However, due to the balance of financing funds falling 3% month-on-month compared to the end of 23Q1 and the decline in interest rates in the price war, the decline in net interest income increased compared to 24Q1.

Proprietary fixed income business performed well

24H1 Oriental Wealth achieved investment income of 1.64 billion yuan (including investment income and profit and loss from changes in fair value), a year-on-year increase of 42%, mainly benefiting from the sharp year-on-year increase in income from the securities self-operated fixed income business.

Profit forecasting and valuation

Dongfang Wealth 24H1's consignment revenue declined significantly, but the market share of the securities business increased and the self-operated fixed income business performed brilliantly, which helped the net profit to return to mother declined less. The net profit growth rate for 2024-2026 is expected to be flat/6%/7%, respectively, and the corresponding EPS is 0.51/0.55/0.59 yuan, respectively, and the current price is 20.32/19.14/17.80 times PE. The company was given 24 times PE in 2024, corresponding to a target price of 12.35 yuan, maintaining a “buy” rating.

Risk warning

The macroeconomy declined sharply; capital market prosperity fell short of expectations; competition in the fund marketing industry intensified.