Incident: On the evening of September 5, Huatai Securities announced that it had completed the sale of all of its shares in AssetMark Financial Holdings, Inc. (hereinafter referred to as AssetMark), a US holding subsidiary.

The company acquired AssetMark for $0.78 billion in 2016 to accelerate the transformation of wealth management and promote international business development. AssetMark is America's leading turnkey asset management project platform (TAMP), providing a full range of services for independent investors. The company acquired AssetMark in 2016 at a transaction price of 0.78 billion US dollars. The purpose of the acquisition was to promote the transformation and implementation of wealth management in an orderly manner by absorbing and drawing on advanced international wealth management service systems and experience, and connect with global resources to accelerate the international development layout. After the acquisition, AssetMark became an important part of the company's international business. 1H2024AssetMark achieved revenue and net profit of 2.072 and 0.509 billion yuan (amounts before internal transactions were offset), contributing 11.9% and 6.6% to the company's total revenue and net profit to mother, respectively.

Proceeds from this transaction are expected to be accrued in the third quarter, with a 175% increase in pre-tax profit based on static estimates for the 3Q2023 single quarter. The company expects to receive 1.793 billion US dollars in cash from this transaction, achieving revenue of approximately 0.796 billion US dollars, equivalent to RMB 5.649 billion (calculated at the September 5 spot exchange rate). According to the time the transaction was completed, the company is expected to accrue one-time revenue for the third quarter of 2024. Based on static data for the 3Q2023 single quarter, it is expected to increase Q3 revenue and profit before tax by 63.8% and 175.4% respectively; using the sum of 1H2024 and 3Q2023 single-quarter company performance as the company's performance base for the first three quarters of 2024, it is expected to increase the company's revenue and profit before tax by 21.5% and 64.2%, respectively, for the first three quarters of 2024 compared to 2023 The first three quarters were +17.3% and +28.8% year-on-year.

The strategic goals of the acquisition have been basically completed, there is limited room for further inward migration of TAMP experience, and it is expected that the return capital will continue to be used for international layout. The reason for the sale of the company is that the company has absorbed and drawn on AssetMark's advanced experience, promoted the transformation and upgrading of the wealth management business, and has basically achieved the strategic goals set at the time of acquisition. Considering that the current domestic independent investment model is difficult to liberalize in the short term, AssetMark's TAMP experience has limited room for further inward migration. The company said that the return capital will be used to supplement working capital and other general corporate purposes, and we expect to continue to focus on overseas business and promote the further development of the internationalization strategy.

Investment advice: This transaction is expected to accrue revenue in the third quarter of 2024, greatly increasing the company's performance. Therefore, we raised the company's profit forecast. The company is expected to achieve net profit of 16.701, 15.092, and 17.404 billion yuan respectively in 2024-2026, +31.0%, -9.6%, and +15.3% year-on-year respectively. The current close corresponds to the 2024 PB of 0.59 times, maintaining the “gain” rating.

Risk warning: risk of large fluctuations in the capital market; risk of a sharp decline in market transaction scale; risk of industry regulatory policies exceeding expectations and tightening