Incident: 10/30, Orient Securities disclosed its 2024 three-quarter report. The results were in line with expectations. 9M24 achieved revenue of 14.08 billion yuan, +2.8% year over year, net profit of 3.3 billion yuan year over year; of these, 3Q24 net profit to mother was 1.19 billion yuan, +24.6% year on month, -2.8%% month on month; 9M24 weighted ROE (unannualized) was 4.16%, +0.49pct year on year.

The 3Q24 profit growth rate (qoq -2.8%) was lower than the revenue growth rate (qoq +11.0%), mainly due to increased cost investment. 3Q24 management expenses were 1.93 billion/month-on-month +17%, driving the quarterly management expense ratio (management fee/main securities revenue) of 56.1%, an increase of 5.2 pcts month-on-month. The month-on-month increase in management fees exceeded the month-on-month increase in operating income.

With the exception of investment income, revenue from all other business lines declined year on year, and investment income contributed nearly half of the main revenue. 1) Growth rate and performance attributes of various lines: 9M24 securities main revenue of 9.11 billion (excluding bulk commerce and government subsidies, etc.), down 5% year on year; 9M24 business line revenue/year over year: brokerage 1.6 billion/ -26%, investment bank 0.83 billion/ -30%, asset management (mainly Eastern Securities Asset Management) 1.02 billion/ -37%, net interest 0.92 billion/ -31%, investment income 4.14 billion/ +77%, long-term stock investment (mainly (Huitianfu) 0.31 billion/ -36%. 9M24 revenue share: brokerage accounts for 18%, investment banks account for 9%, asset management accounts for 11%; net interest income accounts for 10%, net investment income accounts for 45%, and long-term stock investment accounts for 3%.

Proprietary equity operations supported 3Q24 performance, and equity risks in the credit business were basically cleared. In Orient Securities's proprietary business, equity self-management adheres to a high dividend strategy, and the fixed income proprietary bond holding structure continues to be optimized. 3Q24's investment income was 1.86 billion yuan/YoY +97% /month-on-month +26%. The company adjusted its financial investment asset structure: At the end of 3Q24, the company's financial investment scale was 200.5 billion, the same as at the beginning of the year. In terms of structure, 1) equity exposure increased by 1) Equity exposure, and the company's proprietary equity securities and derivatives/net capital index increased by 9.8 pcts compared to the end of 23, 2) At the same time, investment in perpetual bonds and other equity instruments with high dividend assets increased sharply by 166% from the beginning of the year to 16.7 billion yuan (55% of perpetual bonds and 34% of stocks in 1H24 other equity instrument increments), and the estimated 3Q4 annualized return on investment was 7.6%. Stock risk was basically cleared: at the end of 1H24, the company's net stock value (share balance - reserve for impairment) was approximately 1.12 billion yuan/29% lower than at the end of 2023, and 3.79 billion yuan of assets purchased and resold at the end of 3Q24, down 30% from the beginning of the year, mainly due to reverse bond repurchases and a decrease in share size. Credit impairment was calculated at 0.31 billion yuan during the reporting period, compared to -69.5% year on year.

Asset management pressure declined year on year, and active management capabilities are expected to deliver results. 3Q24 The company's asset management revenue (mainly TSE asset management) is 0.31 billion yuan/yoy -35%; long-term stock investment revenue (mainly Huitianfu) is 0.08 billion yuan/yoy -39%. In terms of public offering scale, Dongzheng Asset Management: 9M24, Modong Securities Asset Management has a non-commodity public offering management scale of 150.6 billion yuan, -10% compared to the beginning of the year (+16% compared to the beginning of the year), of which the stock mix was 99.3 billion yuan (accounting for 66% of non-goods), -12% compared to the beginning of the year; Huitianfu: 9M24 Mihui Tianfu's non-commodity public fund size was nearly 502.4 billion yuan, +12% compared to the beginning of the year (+16% compared to the beginning of the year), of which the stock mix was 249 billion yuan (accounting for 50% of non-goods) compared to the beginning of the year %, ETF size of 53.5 billion yuan, +24% compared to the beginning of the year. Eastern Securities Asset Management and Huitianfu focus on active equity fund layout and continue to enrich fixed income and stock index products. We believe that under the circumstances of supervision to guide medium- and long-term capital entry into the market, increase the share of equity, and boost market transactions, Oriental Asset Management will continue to release performance in the future.

Investment analysis opinion: Raise profit forecasts and maintain buying ratings. 3Q24 The company's annualized return on investment performance is relatively good. We raised the company's return on investment assumption. The company's net profit for 24-26 is 4.29, 4.9, and 5.52 billion yuan (the original forecast was 3.62, 4.29, 4.92 billion yuan), +56%, +14%, and +13% year over year, respectively. The nine rules of the new country clearly promote medium- to long-term capital entry and vigorously develop equity public offering. The company's active management capabilities of East Securities Asset Management and Huitianfu are expected to benefit from policy catalysis. As a result, performance was realized and a “buy” rating was maintained.

Risk Reminder: On 2024/5/18, the Securities Regulatory Commission publicly disclosed the “Decision on Ordering Corrective Measures against Orient Securities Underwriting and Sponsorship Co., Ltd.”; 2024/9/3, the Shandong Securities Regulatory Bureau disclosed the “Decision on Issuing Warning Letter Measures against Orient Securities Underwriting and Sponsorship Co., Ltd.”; 2024/6/21, the Jiangsu Securities Regulatory Bureau disclosed the “Decision on Issuing Warning Letter Measures against Orient Securities Underwriting and Sponsorship Co., Ltd., Huang Jian, and Liu Zhengyu”.