Incident: On August 30, CICC announced its 2024 semi-annual report. 1H24 achieved operating income of 8.91 billion/yoy -28.3%; realized net profit of 2.23 billion/yoy -37.4%, of which 2Q24 profit 0.99 billion/yoy -24.1% /qoq -20.1%; 1H24 weighted ROE (unannualized) was 2.12% /yoy-1.67pct.

In a weak market environment, all business lines are under pressure. 1H24's securities main revenue was 8.81 billion/yoy -27.8%. 1) Looking at the main revenue split: 1H24's brokerage, investment banking, asset management, other fees, net interest, and net investment income were 17.7, 12.8, 5.6, 1.1, -0.81, and 4.91 billion yuan, respectively, accounting for 20.1%, 14.5%, 6.3%, 12.5%, -9.2%, and 55.7%; year-on-year ratio, -29.1%, -35.7%, -15.0%, -12.4%, -94.0%, -21.2%, respectively. 2) Profit performance is weaker than revenue under the relative rigidity of the cost side: 1H24's business and management expenses were 6.37 billion yuan/yoy -21.6%, and the management rate (management fee/main securities revenue) was 72.3% /yoy+5.77pct.

Operating and investment leverage have shrunk, equity derivatives business is under pressure, and return on investment has fluctuated.

At the end of 1H24, the company's total assets were 599.1 billion/ -4.0% from the beginning of the year, net assets 105.6 billion/ +1.0% from the beginning of the year, operating leverage 4.90x/-0.29x compared to the beginning of the year. In terms of investment business, the investment asset size at the end of 1H24 was 340.2 billion/ -6.1% compared to the beginning of the year, of which 88.8 billion/ -36.6% compared to the beginning of the year, the company's investment leverage at the end of the period was 3.22x/-0.24x compared to the beginning of the year. The estimated return on investment of 1H24 was 2.79% /yoy-0.68pct; based on the net income of transactional financial instruments and derivative financial instruments, 1H24 equity, debt and other investment income, respectively, 1.23, 2.36, 0.29 billion yuan, -34%, +6%, and -37%, respectively. In terms of derivatives business, the scale of equity derivatives business has shrunk, and the nominal principal amount of equity derivatives at the end of the period is 258.6 billion yuan/yoy -33.2%.

The wealth management business is under pressure, revenue from the consignment business has declined markedly, and buyer investment is transforming at an accelerated pace. 1H24 achieved net revenue of 1.36 billion/yoy -21.7% (average daily share base turnover yoy -7% in the 1H24 market) and 0.38 billion/yoy -46.2% of sales revenue. In terms of wealth management transformation, the number of the company's wealth management customers at the end of 1H24 was 7.733 million/ +13.7% compared to the beginning of the year, and the total asset value of customer accounts reached 2.8 trillion/-4.2% compared to the beginning of the year; the company accelerated the buyer investment transformation, and the holding scale of wealth management products at the end of the period was more than 340 billion/ -2.9% compared to the beginning of the year, of which the buyer invested nearly 80 billion.

The investment banking business is under phased pressure, and the competitive advantage of the global investment banking business is maintained. 1H24 completed 4 A-share IPO underwriting projects, with an underwriting scale of 1.57 billion/yoy -93.1%, market share 4.8% /yoy-5.53pct/ ranking 8th in the industry, refinancing lead underwriting scale of 8.66 billion/yoy -82.7%, market share 11.4% /yoy-9.37pct/ranking 2nd in the industry; 1H24's domestic bond underwriting scale was 312.5 billion/yoy +1.7%. In terms of the Hong Kong and US stock business, 1H24 underwrote the Hong Kong stock IPO with a scale of 0.564 billion US dollars/yoy +11.0%/the most stable industry; 1H24 as the bookkeeper led the underwriting scale of the Chinese US stock IPO was 0.147 billion dollars/only 0.014 billion US dollars in the same period last year.

Investment analysis: In 2024-2026E, CICC's net profit is estimated to be 4.76 billion yuan, 5.51 billion yuan, and 6.43 billion yuan, respectively, -23%, +16%, and +17% compared with the same period last year. The 8/30 closing price corresponds to 24-26E dynamic PB 1.50x, 1.44x, and 1.36x, respectively.

Risk warning: The downward pressure on the economy has increased; the activity of market equity transactions has declined sharply; the process of entering the market of residents' capital has slowed down.