Introduction to this report:

Profit declined 37% in the first half of the year, improving month-on-month. The company has outstanding international business and specialization capabilities, and is expected to continue to consolidate its professional advantages and build a world-class investment bank.

Key points of investment:

Maintain the “Overweight” rating and maintain the target price of HK$19.85, corresponding to 0.95xPb in 2024.

The company's 2024H1 revenue/net profit to mother was 8.91/2.23 billion yuan, -28.3%/-37.3% YoY; the weighted average ROE was -1.67pct YoY to 1.21%, in line with expectations. Considering that supply-side reforms in the industry may be accelerated, the company's international business and specialization capabilities are outstanding, and it is expected that it will continue to consolidate its professional advantages and build a world-class investment bank. Taking into account market environment factors, the company's profit forecast was lowered to 2024-2026 EPS 1.10/1.27/1.40 yuan (previous value was 1.33/1.50 yuan/1.63 yuan), and the target price was maintained at HK$19.85, corresponding to 0.95xPb in 2024, maintaining the “gain” rating.

Overall, the young capital business in the first half of the year was under pressure, and exchange fluctuations also dragged down performance. The reasons for the decline in adjusted revenue (operating income - other business costs) were dismantled. Wealth management/brokerage, investment banking, asset management, net interest, investment, and other business revenue contributed to the decline of -21%, -20%, -4%, -11%, -5%, and -39%, respectively. 1) The company's wealth management expertise continued to improve. The company's wealth management expertise remained stable at more than 340 billion yuan at the end of the period, with buyers' investment stabilized at nearly 80 billion yuan, but due to the market environment, proxy purchases fell 15% and the revenue from the consignment financial products business fell 46%; 2) Affected by the market and policies, the investment banking business was under pressure, and 24H1 revenue was 1.28 billion yuan/year over year; 3) The decline in revenue from other businesses was mainly due to net exchange earnings of 0.66 billion yuan in the first half of the year, compared to the same period last year A decrease of 1.14 billion yuan.

Considering that supply-side reforms in the industry may be accelerated, the company's international business and specialization capabilities are outstanding, and it is expected that it will continue to consolidate the advantages of various business specialization and build a world-class investment bank. Supply-side reforms in the industry are expected to accelerate. The State Council said it will concentrate its efforts on building a “national team” for the financial industry to promote the strengthening and excellence of large state-owned financial enterprises. The company has outstanding international business and specialization capabilities, and is expected to continue to consolidate its advantages in specialization. The wealth management business continues to improve asset allocation and investment service capabilities, the investment banking business innovates fixed income products, and continues to improve merger and acquisition service capabilities, which is expected to exceed expectations.

Catalyst: Supply-side reforms in the industry are advancing at an accelerated pace.

Risk warning: The equity market fluctuates greatly. Supply-side reforms in the industry have fallen short of expectations.