Event: The company publishes its 2024 mid-year report. The company achieved operating income of 1.093 billion yuan in H1 in 2024, -15.19% year-on-year; realized net profit to mother 0.073 billion yuan, or -46.30% year-on-year. The weighted average ROE was 0.62%, -0.53 pct year over year. The subsidiary Xiangcai Securities achieved total operating income of 0.725 billion yuan, -9.23% year-on-year, and net profit attributable to the company's shareholders of 0.166 billion yuan, or -5.02% year-on-year.

The decline in net profit was mainly affected by the loss of Big Smart Investment. The financial performance of 2024H1 Xiangcai Co., Ltd. is affected by external factors. During the reporting period, Dazhi Investment's income fell to -19.52 million yuan, resulting in a year-on-year decrease of 60.96 million yuan in the company's investment income, which was the main factor in the year-on-year decline in the company's net profit to mother.

Proprietary business supports performance, and asset-light businesses face challenges. In the first half of 2024, proprietary business revenue was 0.243 billion yuan, up 31.88% from the same period last year, and operating profit was 0.185 billion yuan, up 33.45% from the same period last year. The above changes were mainly due to the increase in revenue from the self-operated FICC business of Xiangcai Securities. The company's own business as a whole continues to maintain a steady investment style. The company's brokerage revenue fell to 0.306 billion yuan, -16.08% year-on-year in the first half of 2024. Affected by the equity financing policy, the company's net income from investment banking fees decreased by 50% year-on-year to 0.03 billion yuan. In the first half of 2024, the company's credit trading business revenue fell 11% year-on-year to 0.2 billion yuan.

The scale of asset management has grown healthily, and the scale of public fund management has steadily increased. The asset management scale of 2024H1 Xiangcai Securities increased from 5.053 billion yuan to 7.774 billion yuan, an increase of 53.85%. The asset management business revenue grew steadily, exceeding 13.7 million yuan, an increase of 11.49% over the same period last year. As of June 30, 2024, Xiangcai Fund managed and operated 17 public offering products and 5 products acting as investment advisors, of which the public fund management scale was 5.418 billion yuan, an increase of 32.96% over the end of 2023; the scale of investment products was 0.084 billion yuan, a decrease of 17.65% from the end of 2023.

Introduce state-owned shareholders to help the company develop with high quality. In July 2024, the indirect controlling shareholder of the company's shareholder Caishang Industrial changed to Zheshang Asset. Through this change, Xiangcai Co., Ltd. will introduce state-owned shareholders, further optimize the company's equity structure and improve the corporate governance structure, and is expected to use the advantages of shareholders of state-owned enterprises to obtain better business resources and form business synergy effects.

Investment and advice: The company's 2024-2026 revenue is expected to be +13.35%, +11.56%, +10.63%; net profit to mother 0.15 billion yuan, 0.22 billion yuan, 0.283 billion yuan, +33.68%, +37.58%, and +28.90% YoY. EPS was 0.06, 0.08, 0.10 yuan/share, and PE corresponding to the closing price on August 20, 2024 was 110.51, 80.32, and 62.31 times. Upgraded to “Buy” rating.

Risk Alerts: Equity Market Volatility Risk, Equity Pledge Risk, Macroeconomic Fluctuations