[Results for the first half of the year were slightly under pressure, and the decline in revenue from credit business and investment banking business dragged down overall performance] Cathay Pacific Junan achieved adjusted revenue of 6.8/13.4 billion yuan in a single quarter/ first half of 2024, -6.8%/-10.8%; net profit to mother was 2.5/5 billion yuan, respectively, and -6.5%/-12.6% year-on-year. All business lines were under pressure. Credit business, investment banking business, and brokerage business were the main factors driving down overall performance. The year-on-year growth rates of broker/investment banking/asset management/own-operation/credit revenue were -16.7%/-41.0%/-2.6%/+26.7%/-18.1%, respectively. 24. The year-on-year growth rates of broker/ investment bank/ asset management/ ownership/ credit revenue were -12.1%/-24.7%/-8.1%/-5.1%/-32.2%, respectively. ROE was 6.2%, -1.3 pct compared to the same period last year; leverage decreased -0.21% to 4.43x.

[Decline in market trading activity compounded by strict regulatory policies, leading to a decline in brokerage, investment banking, and credit business] 1) In terms of brokerage business: the company achieved brokerage revenue of 3.08 billion yuan in the first half of '24, -12.1%; in terms of fund consignment sales, revenue from consignment financial products declined, from -21.1% to 0.28 billion yuan; capital market activity was weak, and market trading performance was sluggish. The main reason for the decline in brokerage business revenue was only 841.7 billion yuan, compared to only 841.7 billion yuan compared to -20.4% year-on-year.

2) Investment business: Stricter regulatory policies affect the development of the company's investment banking business, leading to a contraction in the scale of securities underwriting.

The company achieved investment banking revenue of 1.17 billion yuan in the first half of '24, -24.7%; it was mainly affected by the tightening of regulatory policies such as IPO and refinancing in August 23, which had a significant impact on the scale of the IPO. The scale of the company's IPO in the first half of '24 was 1.39 billion yuan, compared to -86.4% year on year. The sharp decline in the scale of securities underwriting dragged down the company's investment banking business revenue.

3) Credit business: The company achieved credit business revenue of 1.04 billion yuan in the first half of '24, compared to -32.2%; due to the suspension of securities transfer business by regulatory policies, etc., the company's securities financing balance declined in the first half of '24, leading to a decline in interest income from the company's securities financing. The balance of financing and securities financing as of the end of June '24 was 1480.9 billion yuan, -6.8% compared with the same period last year. The financing/securities loan balances were 1449.3/31.6 billion yuan, respectively, compared with the same period last year 66.0%

[Public offering fee cuts led to a slight decline in fund management business revenue, which dragged down the overall asset management business] In terms of asset management, the company achieved asset management revenue of 1.92 billion yuan in the first half of '24, -8.1% year over year; public fund management revenue was 1.47 billion yuan, -15.6% year over year, which was the main reason for dragging down asset management business revenue. 1) From a scale perspective, the scale of non-commodity public equity management was expanded; the holding of Guotai Junan Asset Management's non-goods holdings was 36.3 billion yuan, +58.0%; the participating Huaan Fund (holding 51.0% shares) had a non-commodity holding scale of 343.8 billion yuan, +4.8% year over year; the scale of asset management business rose slightly to 530.7 billion yuan, +14.3% year over year, mainly due to a sharp increase in the scale of pooled asset management. 2) From a revenue perspective, although the scale of non-commodity public offerings has expanded, overall fund management revenue has declined due to public fund fee cuts, suppressing asset management revenue.

[24H1 self-operated business performance was relatively stable, Q2 self-operated revenue achieved positive growth] In terms of self-operated business, the company achieved self-operated business revenue of 2.56/4.93 billion yuan in the single quarter of 24Q2 and +26.7%/-5.1%, respectively, and achieved significant positive growth in Q2 in '24; the scale of proprietary financial assets was 433.9 billion, compared to -0.3% in the same period last year, and the return on investment also declined slightly to 1.14%, compared to -0.06Pct in the same period last year. The performance is relatively stable.

Investment advice: We believe that, driven by the new “National Nine Rules” policy, it is clear that the market valuation system is being restructured using dividend rates, so assets with high dividend value are expected to have an advantage for quite some time in the future. Cathay Pacific Junan's dividend rate of 2.8% in the past 12 months has outstanding performance among brokerage firms. Driven by policies that use dividend rates as a transmission variable, the boom in the high-dividend sector is expected to drive up the company's valuation. According to the latest disclosure of financial data to update the profit forecast for 24/25/26, net profit to the mother was 17.9/19.9 billion yuan before 24/25. Due to regulatory policies that suppressed business revenue, it was adjusted to 10.6/11.6/12.8 billion yuan in 24/25/26. The net profit to the mother is expected to grow at a year-on-year rate of +13.0%/+9.7%/+10.3% year-on-year, maintaining the “buy” rating.

Risk warning: The capital market has fluctuated sharply; regulatory policies have changed; the company's business development has fallen short of expectations.