Introduction to this report:

By cashing in on some of the financial instruments with higher valuations, the increase in net income from 2024H1 investments drove the company's adjusted revenue year-on-year growth. The company continues to enhance the professional service capabilities and coverage of risk management, which helps to achieve high-quality development.

Key points of investment:

Maintain the “overholding” rating and maintain the target price of 21.20 yuan/share, corresponding to 35.18xPe and 3.64xPb.

The company's 2024H1 revenue/net profit to mother was 1.002/0.137 billion yuan, +65.44%/16.6% year over year; the weighted average ROE was +0.5pct year over year to 5.05%, and the performance was slightly higher than expected. The increase in profit forecast is EPS of 0.60/0.65/0.72 yuan for 24-26 (adjusted 0.57/0.64/0.70 yuan); maintain the target price of 21.20 yuan/share, corresponding to 35.18xPe and 3.64xPb.

The increase in net revenue from 2024H1 investments drove the company's adjusted revenue year-on-year growth, while the year-on-year decline in net revenue from the futures brokerage business dragged down performance. 1) The company's net income from investment business in the first half of 2024 was +1663.82% to 0.126 billion yuan, contributing 203.51% of the adjusted revenue (operating income - other business expenses) increase of 203.51%. The main reason was that the company realized some financial instruments with a year-on-year increase in valuation, and the return on investment increased by 30.19pct to 32.08% year on year. The size of financial assets was -6.30% year-on-year to 0.369 billion yuan. 2) However, due to the impact of the market environment, net revenue from futures brokerage business was -27.76% to 0.159 billion yuan, accounting for -104.90% of the adjusted revenue increase, which dragged down performance.

The company continues to enhance the professional service capabilities and coverage of risk management, which helps to achieve high-quality development. The company is continuously strengthening professional team building in risk management business, giving full play to the synergy of subsidiary companies, adding branches in financially developed regions and industrial centers to improve risk management business coverage. Actively participate in the “Insurance+Futures” pilot project and continuously accumulate experience in the management of OTC derivatives; at the same time, we vigorously promote development cooperation with financial institutions and make every effort to increase the number of corporate clients. It helps to grasp the increasing risk management needs of industrial customers and achieve high-quality development.

Catalysts: Innovative business models such as “insurance+futures” generate rapid revenue growth.

Risk warning: The futures market fluctuates greatly; performance fluctuates due to subsidiaries carrying out proprietary investment business.