Incident: CICC released its 2024 mid-year report, achieving operating income and net profit of 8.911 and 2.228 billion yuan, respectively, and a weighted ROE of -1.68pct to 2.12%; of these, 2Q2024 single quarter revenue and net profit attributable to mother were 5.037 and 0.989 billion yuan, respectively, -18.9%, -24.1%, and +30.0% and -20.1%, respectively.

The fee business is under pressure across the board, contributing nearly half of the investment revenue. On the revenue side, net income from 1H2024 brokerage, investment, investment was 17.70, 12.81, 0.556, -0.814, and 4.249 billion yuan, respectively, -29.1%, -35.7%, -15.0%, -94.0%, and -4.0% year-on-year, accounting for 19.9%, 14.4%, 6.2%, -9.1%, and 47.7% of adjusted revenue, respectively; on the cost side, management expenses ranged from -21.6% to 6.37 billion yuan, and management expense ratios + 6.1 pct to 71.5%. By region, 1H2024's domestic and overseas business revenue was 6.619 billion yuan and 2.291 billion yuan, respectively, -29.8% and -23.3% year-on-year respectively. Domestic and overseas operating profits were 1.366 and 1.115 billion yuan, respectively, or -45.2% and -36.8% year-on-year respectively.

The domestic equity exhibition industry of investment banks has shrunk markedly, and overseas equity still maintains a leading edge. 1) In brokerage business, 1H2024's net revenue from purchasing, seats, and consignment sales was 1.05, 0.306, and 0.381 billion yuan, respectively, -14.9%, -38.6%, and -46.2% year-on-year respectively. 2) In the investment business, the decline in investment bank revenue was mainly affected by the phased tightening of domestic equity financing. The A-share IPO and refinancing scale of 1H2024 was 1.6 and 8.7 billion yuan, respectively, -93.1% and -82.7% year over year, and the debt financing scale was 312.5 billion yuan, +1.7% year over year; despite the pressure on the domestic investment banking industry, the company still ranked first in the industry in terms of equity financing and mergers and acquisitions in Hong Kong stocks. 3) Asset management business. At the end of 1H2024, the company's asset management scale was -10.7% to 545.9 billion yuan, of which the consolidated and single asset management scales were 159.8 and 386.1 billion yuan respectively, -6.4% and -12.3%, respectively.

The loss of income from the Science and Technology Innovation Board and investment led to a decline in equity investment income, and the decline in the scale of domestic and foreign financing led to a decrease in interest income. 1) Investment business. The company's investment income (investment income+fair value change profit and loss - investment income from joint ventures and joint ventures) was -0.4% to 4.249 billion yuan, of which net income from equity investment, bond investment, and other investment income was 1.234, 2.364, and 0.294 billion yuan, respectively, -34.4% year-on-year, respectively. Losses caused by the Science and Technology Innovation Board and follow-up investment were the main reason for the decline in equity investment income. The company's transactional financial assets at the end of 1H2024 were -12.7% to 4.249 billion yuan compared to the beginning of the year 248.4 billion yuan. Derivative financial assets were -39.5% to 11.5 billion yuan compared to the same period last year. 2) Credit business. At the end of 1H2024, the company's financing and purchase and resale financial assets were 33.2 and 28.8 billion yuan respectively, -7.2% and +44.4% respectively. The corresponding interest income from the two loans and purchases and resale was 1.131 and 0.354 billion yuan respectively, -18.8% and -14.6%, respectively.

Investment advice: We are still optimistic about the unique competitive advantage brought by the company's first-class investment banks and international genes. The short-term exhibition industry is under pressure, and the company is expected to achieve net profit of 4.777, 6.163, and 7.487 billion yuan in 2024-2026, respectively, -37.1%, +29.0%, and +21.5% year-on-year, respectively. The closing of August 30 corresponds to the 2024 PB of 1.27 times, maintaining the “increase in holdings” rating.

Risk warning: risk of large fluctuations in the capital market; risk of a sharp decline in market transaction scale; risk of industry regulatory policies exceeding expectations and tightening