Incidents:

CITIC Securities released its 2024 interim report. In the first half of 2024, it achieved a total operating income of 30.183 billion yuan, a year-on-year decrease of 4.18%, and realized net profit to mother of 10.57 billion yuan, a year-on-year decrease of 6.51%. The 2024H1 company's weighted average ROE was 3.96%, a year-on-year decrease of 0.31pct; the financial leverage ratio was 4.51 times, down 0.01 times from the beginning of the year. 2024H1's broker/investment banking/asset management/credit/own/other business revenue accounted for 16.17%/5.75%/16.28%/3.7%/38.86%/19.24% of total revenue.

Comment:

The scale of equity underwriting has declined sharply, and investment banking revenue is clearly under pressure. The scale of equity financing in the A-share market in the first half of 2024 was 172.973 billion yuan, down 73.9% year on year. Among them, the scale of IPO issuance fell 84.5% year on year to 32.493 billion yuan, and the scale of refinancing issuance fell 68.99% year on year to 140.48 billion yuan. The contraction in the distribution scale led to a sharp decline in the company's underwriting scale. 2024H1 completed 4 IPO projects, with a main underwriting scale of 5.066 billion yuan, down 84.69% year on year, with a market share of 15.59%, ranking second in the market; completed 24 refinancing projects, with a main underwriting scale of 26.83 billion yuan, down 78.66% year on year, and ranked first in the market with a market share of 19.1%. Against the backdrop of a sharp decline in the scale of equity underwriting, the company's investment banking business revenue fell 54.62% year over year to 1.735 billion yuan.

The transaction volume of the 2024H1 market contracted, and the company's brokerage and credit business revenue declined. (1) In the first half of 2024, the average daily share base transaction volume in the domestic market was 984.6 billion yuan, down 6.83% year on year, and the company's brokerage business revenue fell 8.77% year on year to 4.31 billion yuan, driving the company's brokerage business revenue down 7.75% year on year to 4.88 billion yuan. (2) Affected by the contraction in market transaction volume, the company's 2024H1 securities lending business interest income decreased by 18.14% year on year to 3.444 billion yuan, combined sales and repurchase interest expenses increased by 34.91% year on year to 4.199 billion yuan, and the company's credit business revenue fell 47.44% year on year to 1.116 billion yuan.

Revenue from the company's asset management business declined slightly, and revenue from its own business continued to grow positively at a high base.

(1) The scale of the company's asset management grew steadily. As of 2024H1, it was 1456.356 billion yuan, an increase of 4.89% over the beginning of the year. Huaxia Fund's assets under management were 2158.489 billion yuan, up 18.37% from the beginning of the year, but due to the decline in management fees, the company's asset management business revenue declined slightly by 1.08% to 4.914 billion yuan. (2) Affected by fluctuations in the equity market, 2024H1 achieved an investment income of 8.888 billion yuan, a year-on-year decrease of 12.82%, but the fair value of investment assets increased sharply by 79.09% year-on-year to 3.062 billion yuan, driving the company's own business revenue to slightly increase by 1.66% to 11.731 billion yuan over the same period last year.

Investment advice: As a leading company in the securities industry, the company's performance is steady and its competitive advantage is outstanding.

Due to the sharp decline in the scale of equity financing in the first half of the year, the adjusted net profit forecast values for the 2024 to 2026 were 216.62, 245.75, and 27.695 billion yuan. The corresponding PB valuations were 0.94, 0.87, and 0.81 times, maintaining the “buy” rating.

Risk warning: The company's performance falls short of expectations, regulatory policies have changed, and the macroeconomy is declining.