The 1H24 results of Guolian Securities are basically in line with the performance forecast

The company's 1H24 revenue was -40% to 1.086 billion yuan, net profit attributable to mother -85% to 0.088 billion yuan, annualized ROAE -5.98ppt to 1.0% year over year, which is basically in line with the performance forecast; 2Q net profit -22% YoY /month-on-month reversal loss, with an annualized ROE of 6.8% per quarter. The sharp decline in performance was mainly due to loss in investment income due to market fluctuations in the first quarter, the investment banking business weakened along with the market, and the cost side was more rigid.

The company maintained a steady pace of table expansion, and the leverage ratio at the end of Q2 was +0.2x to 4.6x compared to the beginning of the year.

Development trends

Financial management and institutional business are developing steadily, and brokerage revenue performance is superior to the market. 1) Net revenue from 1H24 brokerage business was +7% to 0.279 billion yuan, of which revenue from brokerage trading was -12%, revenue from consignment sales of financial products +16%, and revenue from lease of trading unit seats was +38%. Rapid development of wealth management and institutional business led to an increase in brokerage business revenue against the market. The company's total number of fund investment customers at the end of the period was +13% to 0.319 million, and the authorized account size remained basically flat at 6.96 billion yuan year over year. 2) Credit business: Interest income from the two loans was basically the same year on year, corresponding to the average daily size of the two loans -5.7% to 9.43 billion yuan, and the market share ratio was -2ppt to 0.62% year over year; interest income from stock pledges remained low year-on-year; interest income from stock pledges remained low year-on-year.

Investment bank revenue is declining as the market declines, and the asset management business is developing rapidly. 1) The revenue of 1H24 Investment Bank was -40% YoY to 0.169 billion yuan. Among them, stock underwriting was -90%, our calculated market share was -0.3ppt to 0.17%, bond lead underwriting was -25%, and our calculated market share was -0.1ppt to 0.22% year-on-year. 2) 1H24 asset management revenue +111.3% year over year to 0.312 billion yuan, of which the company's asset management scale was +12% to 124.8 billion yuan, corresponding aggregate (including large pools to public offering) /special revenue was +47%/+7% year over year, and the League of Nations Non-Stock Fund AUM was +57.6% to 127.9 billion yuan, and the corresponding revenue/net profit ratio was -21% /year over year.

The company completed the merger of China Finance Fund in August of last year, obtained approval for the establishment of an asset management subsidiary in September, and the official opening of Guolian Securities Asset Management in the first half of this year. The pace of the company's asset management business exhibition continues to accelerate. We believe that the company's asset management business is expected to enter a period of leapfrog development and further open up room for growth.

The investment business was dragged down by market fluctuations and improved significantly in the second quarter. 1H24's investment revenue was -61% YoY to 0.38 billion yuan, of which 2Q investment revenue was -11% YoY/a sharp decline of 0.53 billion yuan. 1H24 transactional financial assets were basically the same as at the beginning of the year to 38.7 billion yuan (of which bonds +8%, accounting for 62%; stocks -48%, accounting for 4%), and the return on investment in transactional financial assets was -3.6ppt to 1.9% year-on-year.

If interest income from other debt investments is taken into account, the year-on-year comprehensive investment income is -60% to 0.46 billion yuan, the corresponding annualized comprehensive investment return is -3.1 ppt to 1.9% year over year.

Profit forecasting and valuation

We keep the company's profit forecast unchanged. Currently, the company's A shares are traded at 24e/25e 1.5x/1.5xp/b, and Hong Kong stocks are traded at 24e/25e 0.4x/0.4x P/B. Maintain the target price of A Shares/H Shares and outperform the industry rating. A shares correspond to 24/25e 2.2x/2.2x P/B and 46% upward space, and H shares correspond to 24/25e 0.6x/0.6x P/B and 51% upward space.

risks

The risk of market fluctuations, regulatory policy uncertainty, and business transformation and development falling short of expectations.