Incident: CICC released its 2024 mid-year report. The company's total 2024H1 revenue and other revenue was -20.0% to 14.892 billion yuan, and net profit to mother was -37.4% YoY to 2.228 billion yuan.

Asset-light business: Revenue from fee-related businesses has generally declined, and the investment banking business is under significant pressure. The handling fee and commission revenue of 2024H1 CICC was -25% to 5.462 billion yuan year-on-year, and the shrinking revenue from the fee business constituted the main reason for the decline in the company's performance. 1) Investment business: According to Wind statistics, the IPO/refinancing scale of the 2024H1A share market was -85%/-69% year-on-year to 32.5/140.5 billion yuan, respectively. The company's 2024H1A IPO/refinancing lead underwriting scale was -93%/-83% to 1.6/8.7 billion yuan, resulting in the company's 24H1 underwriting and sponsorship business revenue of -52% to 0.9 billion yuan. 2) Brokerage business: In the first half of 2024, the average daily trading volume of A shares was -8.5% to 862.7 billion yuan, and the average daily trading volume of Hong Kong stocks was -4.4% year-on-year to HK$110.4 billion. The company's 24H1 brokerage business revenue was -25% to 2.3 billion yuan, and its performance fell short of the overall market. We expect that the impact of the public offering fee reform on the wealth management line will be initially evident, and the consignment financial products business accounts for a relatively high share of the company's brokerage business (according to the company's A share announcement, 24H1's revenue from consignment financial products was -46% to 0.38 billion yuan). 3) Asset management business:

24H1's asset management business revenue was -8% year-on-year to 1.5 billion yuan. The size of the company's 24H1 pooled asset management/public fund was +15%/+25% respectively at the end of the previous year to 160.9/179.2 billion yuan. The decline in asset management business revenue is expected to be affected by the decline in management rates.

Asset-heavy business: Investment income declined slightly, and interest income declined due to the contraction of two loans. 1) Proprietary business: 24H1's investment income was -4% to 4.249 billion yuan, of which net income from disposal of financial instruments and derivative financial instruments measured at fair value and whose changes were included in the current profit and loss was -15% to 0.69 billion yuan (net income from equity investment -34% to 0.65 billion yuan), mainly due to fluctuations in income from securities held by the Science and Technology Innovation Board. 2) Interest income: 24H1's interest income was -10% to 4.425 billion yuan, mainly due to a decline in market trading sentiment, resulting in 19% to 1.1 billion yuan of interest income from the company's securities financing compared to the same period last year.

Profit forecast and investment rating: Based on the company's 2024H1 business situation, we lowered our previous profit forecast. The company's net profit for 2024-2026 is 5.158/6.77/7.919 billion yuan (previous values were 62.40/71.29/8.261 billion yuan, respectively), and the corresponding growth rates are -16.22%/31.27%/16.96%, respectively. The corresponding EPS is 1.07/1.40/1.64 yuan respectively, and the current market value corresponds to 2024- The 2026 PB (H) valuation was 0.39/0.36/0.33 times, respectively. I am optimistic about the company's long-term competitive barriers in investment banking and wealth management business. After market trading activity and market conditions fully recover, the company is expected to further develop its leading advantage and maintain a “buy” rating.

Risk warning: 1) The equity market fluctuates greatly; 2) the tightening of IPOs and refinancing exceeds expectations.