Incident Overview

The company achieved operating income (minus other business costs, same below) of 12.34 billion yuan, -27% year on year; net profit to mother of 5.31 billion yuan, -19% year on year, ROE 3.18%, and -1.05 pct year on year. Among them, 24Q2 revenue was 6.62 billion yuan, -19%/+16% year over year; net profit to mother was 3.02 billion yuan, -9%/+32% year over month. The company plans to distribute 25.50% of net profit from dividends to mother in mid-2024.

Analytical judgment:

Securities self-employment and exchange earnings each contributed 34% and 30% of the revenue decline. Judging from the revenue growth rate, foreign exchange earnings, equity investment, and investment bank revenue declined the most, falling 87%, 50%, and 42% respectively, which dragged down performance; securities self-employment and brokerage business were -28% and -14% respectively; asset management and interest income increased year-on-year, with increases of +6% and +11% respectively.

In terms of incremental revenue contributions, securities self-employment and exchange earnings contributed 34% and 30% of the revenue decline, respectively, and investment banking and brokerage business chalk contributed 15% and 9% to the revenue decline. The slight increase in asset management and interest income hedged the decline in performance.

In terms of revenue structure, securities investment and brokerage business accounted for the highest share of revenue, at 34% and 22% respectively, and asset management revenue accounting for 18%; investment banking, interest, equity investment, and other business income accounted for 8%, 6%, 5%, and 7%, respectively.

Management expenses bucked the trend and increased +3% year over year.

Fee-related business: Excellent asset management. Brokerage and investment banks basically beat the industry's net brokerage business revenue of 2.72 billion yuan during the reporting period, or -14% over the same period last year. Among them, the net revenue of retail brokerage, institutional brokerage, consignment financial products, and futures brokerage was 19.1/0.36/0.25/0.2 billion yuan, respectively, compared with -9%, -10%, -28%, and -33%, respectively. The structure accounted for 70%/13%/9%/8%, respectively.

Investment banking revenue during the reporting period was 0.93 billion yuan, -42% YoY. According to the underwriting amount market share, the company's IPO business scale was 5.03 billion yuan, with a market share of 16.6%, +11.2 pct; the refinancing scale was 6.51 billion yuan, with a market share of 11.3%, +1.4pct year on year; and the core bond underwriting scale was 132.5 billion yuan, with a market share of 4.9%, or 1.2 pct year on year.

Revenue from fiduciary asset management business was $2.22 billion, +6% year over year. Among them, the total asset management business scale of securities companies at the end of the reporting period was 506 billion yuan, +11% year over year, net revenue 0.59 billion yuan, -16% year over year; AssetMark asset management business revenue was 2.2 billion yuan, +15% year over year. Southern Fund and Huatai Berry's partial equity fund size reporting period were 275.5/314.3 billion yuan respectively, +4% and +72%, respectively. Net profit to mother for the first half of the year was 1.04/0.32 billion yuan, respectively, 5% and 35%, respectively.

Capital business: Securities investment income declined, and the market share of the two finance companies declined. The company's securities proprietary business revenue during the reporting period was 4.21 billion yuan, -28% over the same period last year. The financial asset investment scale at the end of the reporting period was 425.2 billion yuan, -7% year-on-year; the return on investment during the reporting period was 0.94%, down 0.39pct year on year.

Net interest income was 0.71 billion yuan, +11% year-on-year, outperforming the industry. Mainly due to the sharp decline in interest rates on the company's securities purchases and capital consolidation. At the end of the reporting period, the scale of the two loans was 105.5 billion yuan, with a market share of 7.13%, -0.14pct year on year.

Investment advice

The company announced in April '24 that it plans to sell all of its shares in AssetMark. If successfully completed, it is expected to increase the company's profits. Without considering the sale of AssetMark shares, based on a weaker market environment than expected, we lowered our 24-25 revenue forecast of 38.928/44.427 billion yuan to 38.053/42.872 billion yuan, increased the 26-year forecast of 51.889 billion yuan, lowered the 24-25 EPS forecast of 1.57/1.91 yuan to 1.15/1.35 yuan, and increased the 26-year forecast value of 1.73 yuan, corresponding to 2024 8 yuan At the closing price of 12.58 yuan/share on January 30th, PB was 0.61/0.58/0.55 times, respectively, maintaining the company's “buy” rating.

Risk warning

Stock and bond markets fluctuate sharply, returns on proprietary investments decline; market transactions shrink; equity markets fluctuate; equity market fluctuations risk.