Key points of investment

Performance Overview

24H1 CITIC Securities achieved operating income of 30.18 billion yuan, down 4.2% year on year; net profit to mother of 10.57 billion yuan, a decrease of 6.5% year on year; weighted average return on net assets (unannualized) of 3.96%, a decrease of 0.31 pct year on year. 24Q2 achieved net profit of 5.61 billion yuan to mother, up 13.2% month-on-month, and performance slightly exceeded expectations. By business line, the year-on-year growth rates of 24H1 brokerage, investment banking, asset management, interest, and investment net income were -8%/-55%/-1%/-47%/2%, respectively, accounting for 16%/6%/16%/4%/39% of total revenue, respectively. The company responded to the regulatory call and announced a mid-term dividend on 24H1, with a cash dividend of 2.4 yuan for every 10 shares, corresponding to a dividend rate of 35%, which actively rewards shareholders.

Proxy purchasing continues to decline slightly

24H1 CITIC Securities achieved net brokerage revenue of 4.88 billion yuan, a year-on-year decrease of 8%, mainly due to pressure on trading volume and commission rates. The average daily share base turnover of the 24H1 market was 984.6 billion yuan, down 8% year on year. With no significant improvement in activity and quantitative regulation, it is expected that the decline will continue slightly in the second half of the year.

The asset management business is resilient

24H1 CITIC Securities achieved net revenue of 4.91 billion yuan from asset management business, down 1% year on year, and the decline was narrower than 24Q1. In terms of brokerage asset management, the company's asset management scale at the end of 24H1 was 1.46 trillion yuan, an increase of 5% over the previous year. The market share of the company's private equity asset management business was 13.23%, ranking first in the industry. In terms of public funds, the management scale of Huaxia Fund at the end of 24H1 increased 20% compared to the end of 2023, but due to industry fee reforms, the net profit of 24H1 Huaxia Fund fell 1% year on year to 1.06 billion yuan. Looking forward to the future, passive products are developing rapidly, and regulatory support “establishes a rapid approval channel for tradable open index funds (ETFs) to promote the development of indexed investment”. The company's ETF management scale and share rank in the top 3 in the industry, which is expected to benefit.

Investment performance improved month-on-month

24H1 CITIC Securities achieved net investment income of 11.95 billion yuan, an increase of 2% over the previous year. Among them, net income from 24Q2 investment increased 27% year on year and 15% month on month, mainly because financial assets increased 17% year on year at the end of 24H1, the 24Q2 stock market was more stable than 24Q1, and the Chinese debt-new comprehensive wealth (total value) index in the bond market rose 1.7%.

Profit forecasting and valuation

The company's performance is steady, with an interim dividend rate of 35%, and positive returns to shareholders. The net profit growth rate for 2024-2026 is expected to be 5%/10%/8%, corresponding to BPS of 19.18/20.26/21.42 yuan. It was given 1.2 times PB in 2024, corresponding to a target price of 23.02 yuan, maintaining the “buy” rating.

Risk warning

The macroeconomy declined sharply; trading activity declined sharply; the progress of market reforms fell short of expectations.