CITIC Securities released its three-quarter report: Q3 achieved revenue of 15.958 billion yuan (yoy +11.54%, qoq -2.86%), net profit of 6.229 billion yuan (yoy +21.94%, qoq +11.01%); 2024Q1-Q3 achieved revenue of 46.142 billion yuan (yoy +0.73%) and net profit of 16.799 billion yuan (yoy +2.35%); performance was in line with our previous expectations (9M24E revenue/net) Profit was -1% to +10%/-3% to +7% year-on-year, respectively). Net profit in a single quarter in Q3 hit a 22-year high, and investment performance increased sharply to 9.9 billion yuan, a record high in a single quarter since 2011Q4, which is the core driver of performance growth. Previously, the company declared SFISF of about 10 billion yuan and has completed the first batch of operations. The subsequent use of related funds is expected to further increase investment transaction revenue. Both A and H shares maintained their buy ratings.

Q3 Investment performance hit a new high since 2011Q4, and the scale of investment was further expanded

Market confidence quickly recovered in late September, and the Shanghai and Shenzhen 300 rose 16% during the quarter. The company achieved investment revenue of 9.9 billion yuan in Q3, +134% year-on-year and +58% month-on-month, setting a record high in investment performance in a single quarter since 2011Q4. The total investment revenue for the first three quarters was 21.7 billion yuan, +37% year over year, which is the core driving force for performance growth. The scale of financial investment expanded further, reaching 894.1 billion yuan at the end of Q3, an increase of 120.3 billion yuan (+16%) over the previous month, mainly due to an increase of 123.6 billion yuan in the volume of transactional financial assets compared to Q2. The estimated leverage ratio at the end of Q3 (excluding customer assets) is 4.73x, which is a significant increase from 4.32x at the end of Q2.

Brokerage declined slightly, and net interest expenses were recorded in Q3

Market turnover increased at the end of Q3, but turnover was low from July to mid-September. The average daily share base turnover in Q3 was still -12% year over year, and -9% year-on-year in the first three quarters. The company's net brokerage revenue for the first three quarters was 7.2 billion yuan, -9% year-on-year, and the year-on-year performance was basically the same as that of the market. Q3 The average daily balance of the two financings was also at a low level, -11% year-on-year, and -4% year-on-year in the first three quarters. The company recorded a negative net interest income in the first three quarters, with a net expenditure of 0.2 billion yuan, mainly due to a decrease in interest income from two loans and an increase in interest expenses on sales and repurchases.

Asset management performance is steady, and investment banks are still under pressure

Q1-Q3's net asset management revenue was 7.5 billion yuan, +1% year-on-year, and the holding subsidiary Huaxia Fund achieved net profit of 0.62 billion yuan in Q3. The net revenue of investment banks in the first three quarters was -46% year-on-year to 2.8 billion yuan. According to Wind data, the company's equity and bond underwriting scale in the first three quarters was -77% and +4% year-on-year, respectively.

Give A/H shares a 25-year target of 1.8/1.3 times

Considering the recovery in market sentiment, the average daily share base turnover, investment income assumptions, etc., it is predicted that the company's net profit for 2024-26 will be 22.3/27.6/31.4 billion yuan (previous value 18.7/20.2/22.6 billion yuan), with a year-on-year growth rate of 13%/24%/14%, corresponding EPS of 1.51/1.86/2.12 yuan, and 20.33 yuan for 2025. A/H is comparable to the company 2025E PB Wind's average expectation of 1.04/0.61 times. Considering the company's outstanding investment performance and stable leading position, the target PB premium was given to 1.8/1.3 times, and the target price was RMB 36.59 yuan/HK$28.81, all maintaining the purchase rating.

Risk warning: Business development falls short of expectations, risk of market fluctuations.