Incident: Nanhua Futures released its 2024 mid-year report. 1H2024 achieved total operating income and net profit of 2.638 and 0.23 billion yuan, respectively, -16.1% and +36.7% year-on-year respectively. Net revenue after excluding other business costs was +13.7% to 0.658 billion yuan year-on-year, and weighted ROE increased 1.10pct to 6.03% year over year.

Net interest income is still the main source of incremental growth in the company's performance. 1H2024's net interest income, net handling income, investment income, and other business revenue (net method) were 3.51, 0.272, 0.018, and 0.017 billion yuan respectively, +31.2%, -4.8%, negative to positive, and -59.2% year-on-year respectively. Net interest income was still the main source of incremental growth in the company's performance in the first half of the year.

The Federal Reserve's interest rate hike+the increase in foreign customer equity increased the contribution of domestic and foreign net interest income. 1) Judging from the net interest income structure, overseas accounts for more than 70%. The domestic share is measured by net interest income from the parent company, and the net interest income from the consolidated statement minus the net interest income of the parent company is measured. 1H2024 net income from domestic and foreign interest was 0.095 and 0.256 billion yuan, +34.8% and +30.0%, accounting for 27.1% and 72.9% respectively; 2) Judging from the net interest income growth driven by the Federal Reserve's interest rate increase, the average interest rate for 1H2023 and 1H2024 US federal funds is 4.75% and 5.33%, and interest rates are high for companies Net income from overseas interest forms strong support; the increase in net domestic interest income is expected to be mainly due to the increase in the equity scale of domestic futures brokerage business customers. 1H2024 is +22.1% over the same period last year to 25.774 billion yuan.

The overseas layout is gradually improving, and the increase in handling fees has made up for the domestic decline. 1) In terms of net revenue from handling fees and commissions, 1H2024 was 0.195 and 0.077 billion yuan, compared with -15.6% and +40.6%. Overseas handling fee revenue is growing rapidly. Currently, the company has completed the layout of the four major international cities of Hong Kong, China, Chicago, Singapore, and London, England. In the first half of the year, the company obtained ICE-US exchange liquidation qualifications, and mainstream exchange clearing seats are improving; 2) Other business revenue is mainly based on base difference trading, which mainly corresponds to risk management business, and 1H2024 company risk management business The medium basis trade volume, nominal principal amount of the new OTC derivatives business, and market making business turnover were -24.0%, -23.7%, and -82.5% year-on-year, respectively, to 1.975, 32.465, and 83.749 billion yuan. The gross margin of this business is extremely low. Despite the decline in the company's business volume, the impact on net profit was limited.

Investment advice: Continue to be optimistic that the company will use a global clearing system to boost overseas business. The adjusted company achieved net profit of 0.567, 0.638, and 0.692 billion yuan respectively in 2024-2026, with a year-on-year increase of +41.1%, +12.5%, and +8.5%, respectively. The PE corresponding to the closing price on August 21 was 9.98, 8.87, and 8.18 times, respectively, maintaining the “increase” rating.

Risk warning: the scale of futures agency transactions has shrunk sharply; brokerage business rates have declined sharply; risk management business has experienced market, credit and liquidity risks; overseas business operations fluctuate