Incident: On October 29, CITIC Securities announced its 2024 three-quarter report, which was better than expected. 9M24 CITIC Securities achieved operating income of 46.14 billion/yoy +0.7%; realized net profit of 16.8 billion/yoy +2.3%, of which 3Q24 achieved 6.23 billion/yoy +21.9% /qoq +11.0%; 9M24 weighted ROE (unannualized) was 6.30% /yoy+0.11pct.

The performance resilience of leading securities industry leaders was outstanding, and the increase in investment income contributed to a high increase in profits in the third quarter of a single quarter. 9M24's securities main revenue was 41.13 billion/yoy -3.5%. 1) Looking at the main revenue split: 9M24's brokerage, investment banking, asset management, net interest, and net investment income was 71.5, 28.2, 7.48, 0.92, and 21.94 billion yuan, respectively, accounting for 17.4%, 6.9%, 18.2%, 2.2%, and 53.3%; year-on-year ratio, -8.7%, -46.4%, +1.1%, -72.0%, and +23.2%, respectively. 2) The increase in investment income in a single quarter led to high performance growth: 3Q CITIC Securities brokerage, investment banking, asset management, net interest, and net investment income were -10.6%, -24.5%, +5.6%, -117%, and +62.9%, respectively.

Leverage expanded month-on-month, and the scale of financial investment expanded by double digits month-on-month. It is expected that the rise in the equity market in September will boost the return on investment in a single quarter. At the end of 3Q24, the company's operating leverage was 4.73x/yoy+0.44x/qoq+0.41x, and the final investment leverage was 3.27x/yoy+0.41x/ qoq+0.36x, and the financial investment scale was 937.3 billion yuan/yoy +24.7% /qoq +15.1%; judging from the parent company's perspective, the scale of 3Q24 self-operated equity securities and derivatives was 4 billion/qoq +11.0%, and the scale of proprietary non-equity securities and derivatives was 4 billion yuan/qoq +11.0%, and the scale of proprietary non-equity securities and derivatives was 4 billion8.4 billion yuan/qoq +8.9% In terms of investment business, 3Q24's net investment income is 8.71 billion yuan/yoy +62.9% /qoq +26.3%, and it is estimated that 3Q24 has an annualized return on investment of 3.98% /yoy+1.03pct/qoq+0.64pct in a single quarter.

Under the tightening of policies, the scale of the investment banking business is still under pressure. The leading position in the business has stabilized, and the share share of equity and debt underwriting has increased. According to the release date statistics, 9M24's A-share IPO underwriting scale is 7.25 billion/yoy -85.5%, market share 15.9% /yoy+0.67pct, refinancing underwriting scale 29.6 billion/yoy -75.3%, market share 29.3% /yo+1.09pct; bond underwriting scale 1457.4 billion/yoy +2.8%, market share 14.6% /yoy+0.43pct, ranking first in the industry in terms of market share. In terms of project reserves, as of 10/29, the number of companies reviewing IPOs and refinancing companies was 11 and 105, respectively, ranking first in the industry.

The brokerage and finance business outperformed the industry. In a single quarter, Huaxia Fund's profit surged against the market, and ETFs drove Huaxia Fund's non-commodity AUM to break the trillion dollar mark. In terms of brokerage business, 3Q24's brokerage revenue was 2.27 billion/yoy -10.6% /qoq -6.7% (3Q24 market share base daily turnover yoy -12%, net commission rate is expected to continue the downward trend); credit business: at the end of 3Q24, the company's financing capital was 113.4 billion yuan/4.5% compared to the beginning of the year, with a market share ratio of 7.9%/+0.68pct compared to the beginning of the year. In terms of public equity, 3Q24 Huaxia Fund (holding 62.2%) achieved net profit of 0.48 billion/yoy +29.2%, and 9M24 net profit of 1.69 billion/yoy +8.3%; according to Wind statistics, at the end of 3Q24, Huaxia Fund's non-cargo AUM1177.7 billion/ +44.0% from the beginning of the year ranked second in the industry, with a non-commodity ETF size of 678 billion/ +68.8% from the beginning of the year.

Investment analysis opinion: As a leader in the securities industry, CITIC Securities is expected to continue to benefit from supply-side reforms in the industry and maintain a “highly recommended” rating under the policy guidance of speeding up the construction of first-class investment banks. The estimated net profit of CITIC Securities in 2024-2026E will be 20.89 billion yuan, 27.03 billion yuan, and 29.45 billion yuan, respectively, +6%, +29%, and +9% compared to the same period last year. The 10/29 closing price corresponds to 24-26E dynamic PB of 1.52, 1.41, and 1.32x, respectively.

Risk warning: The downward pressure on the economy has increased; the activity of market equity transactions has declined sharply; the process of entering the market of residents' capital has slowed down.