Incidents:

On August 29, CITIC Construction Investment announced its 2024 semi-annual report. The company achieved revenue of 9.53 billion yuan in the first half of 2024, a year-on-year decrease of 29.2%; net profit to mother was 2.86 billion yuan, a year-on-year decrease of 33.7%; the company's weighted average ROE for the first half of '24 was 3.1%, a decrease of 2.3 pct from the same period last year; and basic earnings per share were 0.3 yuan/share.

Comment:

In 24Q2, the company's revenue and profit both increased month-on-quarter. 24H1 achieved revenue of 9.53 billion, or -29.2% year over year; Q2 increased 21.9% month-on-month to Q1 to 5.23 billion; 24H1's net profit to mother was 2.86 billion yuan, or -33.7% year-on-year; Q2 increased 32.7% month-on-month to 1.63 billion in Q2. 24H1's self-employed/brokering/investment banking/asset management/credit business revenue accounted for 36.8%/26.4%/10.5%/6.7%/4.0% of revenue, respectively. The year-on-year ratio was +5.0/+5.7/-8.9/+2.2/-4.0pct, respectively. The revenue structure changed over the same period last year, and self-employment contributed the main revenue.

Brokerage revenue continued to be under pressure, and net interest income declined year over year. In the first half of the year, the average daily trading volume of the A-share market share base was 984.6 billion yuan, -6.8% year on year; the average balance of the two loans in the 24H1 market was 1.52 percent, or -4.5% year over year. 24H1's net brokerage business revenue was 2.52 billion, -9.7% year over year, mainly affected by shrinking market trading volume; Q2 increased 0.7% month-on-month compared to Q1 to 1.26 billion, which is estimated to be a seasonal business recovery. 24H1's net interest income was 0.38 billion, or -64.6% year over year, mainly due to a decrease in current interest income; Q2 increased 35.5% month-on-month to Q1 to 0.22 billion, which is estimated to be the impact of a decrease in interest expenses in a single quarter. In the future, as the company's active wealth management layout progresses, brokerage business and institutional customer service business are expected to further open up revenue space.

The investment banking business was affected by the market, with net revenue -61.8% YoY. In 24H1, there were 44 IPOs and 115 refinancing projects in the A-share market, respectively. The amount raised was 32.49/140.48 billion, respectively, and the amount raised was -84.5%/-69.0% year-on-year.

24H1 completed 3 convertible bond projects, with a lead underwriting amount of 3.67 billion, or -62.4%; 24H1 completed 5 IPOs with a lead underwriting amount of 1.77 billion, ranking 1st and 7th in the industry, respectively; 24H1's debt financing completed 1,516 lead underwriting projects, with a main underwriting amount of 700.48 billion, both ranked 2nd in the industry, with significant competitive advantage in the investment banking industry. Net revenue from 24H1's investment banking business was -61.8% to 1 billion, mainly due to the decline in the company's investment banking business revenue in the first half of the year due to stricter regulations on the IPO and refinancing markets; the Q2 single quarter increased 23.6% month-on-month to 0.55 billion in Q1. It is estimated that the increase in the scale of debt financing affected Q2's revenue in a single quarter. In the long run, the company's investment banking business has a significant advantage as a market leader, and is still highly competitive.

Under pressure from proprietary businesses, revenue declined year-on-year, and the transformation of active asset management management continued to advance. 24H1's self-operated business revenue (including profit and loss from changes in fair value) was 3.51 billion, -18.2% year over year. Q2 increased 33% over Q1 to 2 billion, mainly due to changes in fair value of financial assets. At the end of the first half of the year, the company's asset management scale reached 521.98 billion, +15.4% year-on-year. The company's asset management business continued to promote active management transformation. In 24H1, the net revenue from the company's asset management business was 0.64 billion, +5.1% year-on-year. The main reason was the increase in the scale of the asset management business to boost the company's asset management business revenue. In the future, with the improvement of the company's ability to specialize, systematize, and refine investment and research in asset management business, asset management business revenue is expected to increase.

Profit prediction and rating: As a listed brokerage firm with strong comprehensive strength, the company has a comprehensive and balanced development. It is expected to take the lead in benefiting from various capital market reform policies and marginal capital market improvement trends in the future. In view of the current turbulent A-share market and uncertainty over the recovery of the company's performance for some time to come, we predict that the company's net profit for 24-26 will be 60.6 (down 47.9%)/67.1 (down 51.8%)/70.6 billion yuan (new), EPS will be 0.78/0.87/0.91 yuan respectively, corresponding PE (A) will be 24.60/22.20/21.12 times, maintaining the “neutral” rating for A-shares and maintaining the “gain” rating for H shares.

Risk warning: The downward pressure on the economy is increasing; active capital market reforms fall short of expectations.