Introduction to this report:

Significant improvements in the investment business in a single quarter boosted performance. The company continues to accumulate differentiated advantages in service quality and productivity, which is expected to improve performance along with the improvement in service needs of related enterprises.

Key points of investment:

Maintain the “Overweight” rating and maintain the target price of 10.78 yuan/share, corresponding to 1.30xPb in 2024.

The company's revenue/net profit for the first three quarters of 2024 was 8.44/1.83 billion yuan, +4.98%/+4.93% year-on-year; the weighted average ROE was +0.05pct to 4.55% year-on-year. Based on the current market environment, the 24-26 EPS forecast was raised to 0.45/0.49/0.52 yuan (the previous value was 0.41/0.43/0.46 yuan). Along with the improvement in the service demand of enterprises related to new quality productivity, the company is expected to achieve improved performance, maintain a target price of 10.78 yuan, and maintain an “increase” rating.

The investment business improved markedly in a single quarter, boosting performance, and the pressure on the investment banking business is still being dragged down. 1) Judging from the incremental split of adjusted revenue (operating income - other business expenses), the investment business contributed 395% of the increase, which is the main support for boosting performance. The company's investment revenue in the first three quarters was +26.0% to 2.503 billion yuan, mainly due to the expansion of investment scale. The average financial investment asset size in the first three quarters was 97.05 billion yuan, +20% year over year. The annualized return on investment improved slightly, +0.16pct to 3.44% year over year. However, Q3 achieved investment income of 1.18 billion yuan in a single quarter, +165.7% y/month-on-month, which was a significant improvement due to the low base and market boost; 2) Affected by the sluggish issuance market environment, the investment banking business in the first three quarters was -43.4% to 0.514 billion yuan, accounting for -301.7% of the adjusted revenue (operating income - other business expenses) increase, which still dragged down the results to a certain extent.

The company continues to accumulate differentiated advantages in service quality and productivity, which is expected to improve performance along with the improvement in service needs of related enterprises. 1) Since the Politburo meeting of the Central Committee on September 26, policy “combo punches” have been introduced one after another, strongly boosting market confidence. Among them, further supporting the development and growth of new quality productivity is an important part of the high-quality development of the capital market. With regard to the new quality of service productivity, the service demand of enterprises is expected to improve marginally. 2) The company has long been deeply involved in the field of small and medium-sized enterprise services, using businesses such as the Beijing Stock Exchange and Innovation Bonds as breakthroughs to gain a leading edge in the industry. By actively exploring businesses such as science and innovation bonds, green bonds, ABS, REITs, etc., the company enhances the supply capacity of financial instruments, unblocks the virtuous cycle of “technology-industry-finance”, and promotes the rapid growth of new productivity-related factors. It is expected to improve performance along with the improvement in service needs of related enterprises.

Catalyst: Marginal improvement in the distribution market.

Risk warning: The equity market fluctuates greatly; fixed income market adjustments.