[Event] China Merchants Securities's performance for the first half of 2024: achieved operating income of 9.6 billion yuan, -11.1% year over year; net profit to mother of 4.75 billion yuan, +0.4% year over year; corresponding EPS of 0.51 yuan, ROE 4.1%, -0.3 pct year on year.

A cash dividend of 0.101 yuan was distributed per share, totaling 0.878 billion yuan, with a dividend rate of 18.5%. The second quarter achieved operating income of 5.3 billion yuan, -12.2% YoY and +23.2% month-on-month; net profit to mother was 2.59 billion yuan, +5.0% YoY and +20.1%.

Wealth management and institutional business transformation have entered a new phase. Brokerage revenue in the first half of 2024 was 2.58 billion yuan, -12.1% year-on-year, accounting for 27.0% of revenue. The average daily share-based trading volume of the entire market was 961.6 billion yuan, -6.4% YoY. The company continues to strengthen the professional capacity building of the wealth advisory team, optimize the wealth advisor empowerment system, and comprehensively improve the quality and efficiency of customer service. Revenue from sales of financial products in the first half of 2023 was 0.227 billion yuan, +5.8% year-on-year, accounting for 8.8% of brokerage revenue; financial product holdings were 6.314 billion yuan, +35.6% compared to the beginning of the year.

The company's balance of two loans was 74.9 billion yuan, -9% compared to the beginning of the year, 5.1% market share, and +0.05pct compared to the beginning of the year.

The company actively grasped the issuance time window, and the share underwriting amount and the ranking of the number of households increased year-on-year. Investment banking revenue for the first half of 2024 was 0.28 billion yuan, -36.3% YoY. The underwriting scale of the equity business was +45.8% year-on-year, and the underwriting scale of the bond business was +35.8% year-on-year. Shareholders' underwriting scale was 11.97 billion yuan, ranking 5th; among them, 2 IPOs raised 3.5 billion yuan; 5 refinancing companies had an underwriting scale of 8.4 billion yuan. The principal underwriting scale of bonds was 176.5 billion yuan, ranking 10th; among them, the underwriting scale of financial bonds, ABS, and corporate bonds was 65 billion yuan, 57.8 billion yuan, and 35.3 billion yuan, respectively. There are 14 IPO reserve projects, ranking 10th, including 3 main boards of the two cities, 2 from the Beijing Stock Exchange, 8 from the GEM, and 1 from the Science and Technology Innovation Board.

The scale of asset management has grown steadily. China Merchants Asset Management continues to build active management capabilities, strengthen the construction of investment and research systems, drive steady growth in the performance of many products, and achieve steady growth in the scale of asset management. Asset management revenue for the first half of 2024 was 0.34 billion yuan, -8.5% year-on-year. Asset management scale was 302.2 billion yuan, +2.5% year-on-year. The asset management scale of Bosch Fund was 1698.7 billion yuan, +8.55% compared to the beginning of the year, of which the public fund management scale was 1077.3 billion yuan, +13.44% compared to the beginning of the year, and the asset management scale of China Merchants Fund was 1608.6 billion yuan, +3.75% compared to the beginning of the year, of which the public fund management scale was 888.2 billion yuan, +3.20% compared to the beginning of the year? Proprietary investment showed positive growth. Investment income (including fair value) for the first half of 2024 was 4.75 billion yuan, +21.3% year over year; investment income (including fair value) for the second quarter was 2.7 billion yuan, +23.3% year over year. The company continues to implement the company's “big and stable” investment strategy, adjust and optimize the investment structure in a timely manner according to changes in the market situation, continuously improve business strategies, and effectively enhance investment income and income stability.

Investment advice: We expect the company's EPS to be 0.99/1.20/1.28 yuan in 2024-26E, and the BVPS will be 13.13/13.99/15.01 yuan respectively. We gave it 1.2-1.3x P/B in 2024, corresponding to a reasonable value range of 15.76-17.07 yuan, maintaining the “better than the market” rating.

Risk warning: Trading volume continues to decline, and investment returns continue to decline due to increased equity market fluctuations.