1H24 results are basically in line with our expectations

The company's 1H24 revenue was -11% to 10.9 billion yuan, adjusted revenue (excluding other business revenue from commodity traders) -22% to 8.1 billion yuan, net profit to mother was -43% to 2.1 billion yuan, and annualized ROAE was -3.5ppt to 4.2% year over year, basically in line with our expectations; 2Q net profit -57% YoY/-47% month-on-month, and 2.9% annualized ROE in a single quarter. The company announced that it plans to pay an interim cash dividend of 0.43 billion yuan, accounting for 20% of the current profit. The 1H24 adjusted management rate was +7.0ppt to 57% year over year, and the leverage ratio at the end of Q2 was -0.3x to 5.1x compared to the beginning of the year.

Development trends

The brokerage business declined with the market, and the personal finance business developed steadily. 1) In terms of brokerage business, net revenue from 1H24 brokerage business was -20% to 1.89 billion yuan, of which net income from brokerage trading securities was -8% to 1.39 billion yuan (vs. -8% total market share base transaction volume), 54% revenue from consignment financial products, and -45% year-on-year share seat rental revenue. The scale of the personal finance business continues to expand. As of the beginning of the year, 1H24's securities clients' assets were +1.25% to 4.01 trillion yuan compared to the beginning of the year, and the total number of signed public fund investors exceeded 0.07 million. 2) In terms of credit business, interest income from 1H24 loans was -9% to 1.82 billion yuan, corresponding to the two financing scale -9% to 56.3 billion yuan at the beginning of the year, and the market share ratio was +0.1ppt to 3.8% year over year; interest income from stock pledges was +7% year-on-year, and the company accelerated clearance of risky projects. As of the beginning of the year, the stock size in the 1H24 table was -1.6% to 1.49 billion yuan compared to the beginning of the year.

The investment banking business is under pressure, and the asset management business has declined. 1) The revenue of 1H24 Investment Bank was -50% to 0.42 billion yuan year-on-year. Among them, stock underwriting was -93%, our calculated market share was -1.4ppt to 0.5% year over year, bond lead underwriting was +18% year over year, and we calculated market share +0.2ppt to 1.6% year over year. 2) 1H24 asset management revenue was -22% to 0.4 billion yuan, corresponding to the company's asset management scale -3% to 195.7 billion yuan, of which active asset management (including special asset management business) accounted for 91%. The company is actively expanding the scale of inclusive financial products such as large-scale public participation products. The scale of large-scale public participation products was +10.6% to 19.64 billion yuan compared to the beginning of the year.

Market fluctuations, compounded by a high base, dragged down the year-on-year performance of the investment business. 1H24 investment business revenue YoY -18% to 5.2 billion yuan, corresponding to transactional financial assets -2% to 232.8 billion yuan at the beginning of the year (of which bonds/stocks/public offering accounted for 53%/17%/18% respectively), and the return on annualized transactional financial assets was -0.3ppt to 4.1% year over year; comprehensive investment income after considering interest income from bond investment and other debt investment interest income was -17% to 5.9 billion yuan, corresponding annualized comprehensive return on investment -0.9 ppt to 3.2 billion yuan %.

Profit forecasting and valuation

Considering declining market activity and investment fluctuations, we lowered the company's 24e/25e net profit 11%/9% to 4.2 billion/5.2 billion yuan. Currently, the company's A shares are trading at 24e/25e 1.1x/1.0x P/B; maintaining the target price and neutral rating, corresponding to 24/25e 1.3x/1.2x P/B and 15% upward space.

risks

Trading volume has shrunk sharply, markets have fluctuated sharply, and regulatory policies are uncertain.