Introduction to this report:

The increase in earnings from derivative financial instruments in the first three quarters of 24 years drove a sharp increase in the company's investment income. The policy promotes high-quality development of the industry, and with its comprehensive service capabilities, the company is expected to benefit from policy support that supports advantages and limits disadvantages.

Key points of investment:

Maintain the “overholding” rating and maintain the target price of 21.20 yuan/share, corresponding to 27.89xPE and 3.33xPb.

The company's revenue/net profit for the first three quarters of 2024 was 1.669/0.271 billion yuan, +104.66%/51.15% year over year; the weighted average ROE was +2.89pct to 9.86% year over year, and the performance was better than expected. The increased profit forecast is EPS of 0.76/0.67/0.74 yuan for 24-26 (0.60/0.65/0.72 yuan before adjustment); maintain the target price of 21.20 yuan/share, corresponding to 27.89xPE and 3.33xPb.

The increase in net investment revenue in the first three quarters of 2024 drove the company's adjusted revenue year-on-year growth, while the year-on-year decline in net revenue from the futures brokerage business dragged down performance. 1) The net income from the company's investment business turned a profit of 0.267 billion yuan in the first three quarters of 2024, +0.285 billion yuan year-on-year, contributing 169.81% of the adjusted revenue (operating income - other business expenses) increase. The main reason was the increase in earnings from derivative financial instruments of structured entities included in the scope of the merger in the current period. At the same time, changes in the valuation of derivative financial instruments of the subsidiary Ruida New Holdings Capital Management Co., Ltd. increased investment income.

The return on investment increased 73.98pct year over year to 69.94%. 2) However, due to the impact of the market environment, net revenue from the futures brokerage business was -33.38% to 0.249 billion yuan, accounting for -74.33% of the adjusted revenue increase, which dragged down performance.

The policy promotes the high-quality development of the futures industry, and with comprehensive service capabilities such as risk management and asset management, the company is expected to benefit from policy support that supports advantages and limits disadvantages. The “Opinions on Strengthening Supervision and Risk Prevention and Promoting High-Quality Development of the Futures Market” policy was introduced to promote the smooth operation and high-quality development of the futures market. On the one hand, as a leading futures company that carries out comprehensive business, the company can enhance customer acquisition capacity and customer stickiness through comprehensive service capabilities such as asset management and risk management along with the standardized development of futures brokerage and other businesses. On the other hand, the company vigorously promotes development cooperation with financial institutions and makes every effort to increase the number of corporate clients. Continuously strengthening professional team building in risk management business, improving risk management business coverage, and helping to better serve the real economy. The company is expected to benefit from policy support that supports advantages and limits disadvantages, and enhances comprehensive strength and resilience to risks through broadening capital replenishment channels, mergers, acquisitions and restructuring.

Catalyst: Policy implementation rules were introduced to promote the high-quality development of the futures industry.

Risk warning: The futures market fluctuates greatly.