Introduction to this report:

All of Huatai Securities's shares in AssetMark have been settled, and the sale is expected to significantly increase the company's revenue and profit levels in 2024 and maintain the shareholding rating.

Key points of investment:

Incident: Huatai Securities issued the “Notice Concerning the Completion of the Sale of All Shares Held in AssetMarkFinancial Holdings, Inc., an American Holding Subsidiary”. Comment:

All of Huatai Securities's shares in AssetMark have been settled, with a consideration value of 1.793 billion US dollars. Huatai Securities announced that the sale of all shares held by the company in AssetMark was settled on September 5, 2024, and the final transaction consideration under this transaction was 1793.3014 million US dollars. The company no longer holds any shares in AssetMark as of the delivery date.

The main reason for selling AssetMark is that AssetMark's TAMP platform model is difficult to migrate domestically. AssetMark is a leading turnkey asset management platform (TAMP for short) in the US market. As a third-party financial service institution, it provides investment advisors with a range of services and advanced and convenient technology platforms such as investment strategies, asset portfolio management, customer relationship management, and asset escrow. In 2016, Huatai acquired AssetMark with the intention of providing platform support for wealth management transformation and connecting with global resources, while promoting an international development layout. The company plans to conduct in-depth cooperation with AssetMark in business fields such as wealth management to gradually promote the application of technology platforms, optimization of management service processes, and product collaboration to enhance the company's core competitiveness. As for the current development of the wealth management industry in China, no independent investment company groups have been formed, and the TAMP platform model is difficult to migrate domestically.

The sale is expected to significantly increase the company's revenue and profit levels in 2024, and the company will focus on improving its international competitiveness in the future. 1) The sale is expected to significantly increase the revenue and profit level of Huatai Securities. According to previous announcements, the company's revenue in 2024 from this transaction (pre-tax caliber in the consolidated statement) is estimated to be approximately 0.79573 billion US dollars, or approximately RMB 5.66 billion (converted at the September 5 exchange rate), or 16.22% of total 2024H1 revenue (annualized) and 50.75% of total profit before tax (annualized), significantly increasing the profit level in 2024. 2) After the sale, it is expected that the direction and layout of the company's international business will be further optimized to focus on enhancing the company's own international competitiveness. AssetMark contributed about 8.09% and 6.33% to Huatai Securities' 2024H1 revenue and net profit, respectively, before internal transactions offset.

Investment advice: Maintain an “Overweight” rating. The sale of shares will significantly increase the company's profit level in 2024. It is expected that the company will also further build its international competitiveness, maintain a target price of 21.04 yuan/share, and maintain an increase in holdings rating.

Risk warning: The equity market fluctuates greatly; the fixed income market fluctuates greatly.