occurrences

Oriental Wealth released its 2024 three-quarter report. In the first three quarters of 2024, it achieved total operating income of 7.304 billion yuan, yoy -13.96%; net profit to mother of 6.042 billion yuan, yoy -2.69%; and ROE 8.14%, a decrease of 1.02pct from the same period last year.

2024Q3's total revenue in a single quarter was 2.359 billion yuan, yoy -13.86% /qoq -5.2%; net profit to mother was 1.986 billion yuan, yoy +0.09% /qoq -5.52%.

The fee business fluctuated with the market, and the self-operated business performed well

1) In the first three quarters of 2024, the company achieved a total processing fee and commission revenue of 3.555 billion/yoy -5.33%, of which 2024Q3 single-quarter processing fee and commission revenue was 1.16 billion yuan/yoy -8.0% /qoq -4.4%. It is expected to be mainly due to a decline in trading between the two markets and a year-on-year decline in commission rates. The average daily stock turnover in the 2024Q3 market was 683.3 billion/yoy -14.2% /qoq -17.6%. As of the end of September 2024, the balance of the two loans in the market was 1.44 trillion yuan, down 13% from the end of 2023. 2) Net interest income for the first three quarters of 2024 was 1.506 billion yuan/yoy -9.71%, and net interest income for the single quarter of 2024Q3 was 0.479 billion yuan, yoy -13.2% /qoq -5.1%. The amount of capital raised by the company at the end of the third quarter of 2024 was 43.8 billion yuan, -5.24% compared with the end of 2023. The estimated market share of the company's financing business was 3.07%, an increase of 0.49pct over the end of 2023. 3) In the first three quarters of 2024, the company achieved investment income and fair value change income of 2.406 billion, yoy +49%. The company's 2024Q3 annualized return on investment was 2.9%, yoy+0.7pct. By the end of 2024Q3, the investment scale of the company's other equity instruments was 13.8 billion yuan, yoy +396%.

The lackluster fund market affects the company's fund business revenue

In the first three quarters of 2024, the company's revenue, mainly fund sales, was 2.243 billion yuan/yoy -26.82%, the 2024Q3 single-quarter revenue was 0.72 billion yuan, and yoy -22.2% /qoq -6.7%. The share of newly issued equity funds in the 20243Q market was 59.7 billion shares, yoy -12% /qoq +6%. The combined impact of fee cuts in the fund market may cause Dongcai's fund sales revenue to decline year-on-year. The third phase of fund fee reduction is expected to be implemented within this year, and may have an impact on Dongcai's consignment business. The overall holding size of Dongcai (Tiantian Fund+Oriental Wealth Securities) may also be under pressure. As of 2024H1, Dongcai Equity Fund's holdings are 383.7 billion yuan, yoy -23.3%.

Profit Forecasts, Valuations, and Ratings

Considering that fund fee cuts affect the company's fund sales revenue, we expect the company's 2024-2026 revenue to be 11.1/12.1/13.7 billion yuan, +0.2%/+9%/+13% year over year, and net profit to mother of 8.4/9.4/10.8 billion yuan, respectively, +3%/+11%/+15% year over year, and EPS of 0.53/0.59/0.68 yuan/share, respectively. As a leading Internet brokerage firm, the company is expected to benefit from future price recovery in the securities market; at the same time, the company announced that it will integrate business and R&D capabilities to form an artificial intelligence division to further open up space for subsequent AI+ finance and maintain a “buy” rating

Risk warning: Market recovery falls short of expectations, increased competition in the industry, risk of policy changes