CICC announced its 2024 three-quarter report. The first three quarters achieved revenue of 13.449 billion yuan, -23.00% YoY, and net profit to mother of 2.858 billion yuan, or -37.97% YoY. Weighted average ROE 2.64%, YoY -2.20pct.

2024Q3 achieved revenue of 4.539 billion yuan in a single quarter, -10.03% yoy, -9.89% month-on-month, net profit to mother 0.63 billion yuan, -39.82% yoy, and -36.31% month-on-month. Q3 Segment revenue month-on-month growth rate in a single quarter:

Brokerage -15.77%, investment banking -5.89%, asset management -2.01%, interest -72.70%, investment +33.97%, revenue share: brokerage 17.43%, investment 17.22%, asset management 6.23%, interest -8.36%, investment 70.75%, others -3.27%. Investment income (including changes in fair value) is the company's main revenue growth point.

The leverage ratio has increased, and the size of assets has resumed expansion. The company's leverage ratio at the end of 2024Q3 was 5.18 times, up from 4.97 times at the end of 2024H1. The expansion was mainly due to the increase in the scale of financial investment assets. At the end of the period, FVTPL assets were 275.363 billion yuan, +10.84% month-on-month, and FVOCI equity assets were 1.781 billion yuan. As the policy boosts the capital market, the company is expected to fully benefit. The company is one of the first brokerage firms to apply for convenient swap operations. Facilitated swap operations are expected to increase the size of the company's stock holdings and enhance the company's performance flexibility. Furthermore, the company is expected to fully benefit from the newly revised brokerage risk control index system, and its ability to use watches is expected to improve.

Client funds have increased slightly, and brokerage business is expected to recover. The company's wealth management business layout is at the forefront of the industry. After merging with CICC Wealth, the company took buyer investment as the core, continued to embrace the trends of public placement, indexation, and globalization, and explored innovative businesses, and achieved good results. In the first half of 2024, the company's wealth management product holdings stabilized at over 340 billion yuan. Among them, the size of buyer investment products composed of products such as “China 50,” “Micro 50,” and “Public Fund 50” stabilized at nearly 80 billion yuan, all of which remained at the forefront of the industry. At the end of 2024Q3, the company's customer capital deposits were 72.951 billion yuan, +18.84% month-on-month. Since October, the average daily turnover of A-shares has been 2 trillion yuan, a sharp increase of 151.40% from 795.5 billion yuan in the previous three quarters. The growth in the company's brokerage business can benefit from market recovery.

The investment banking business is still under pressure, and mergers, acquisitions and restructuring may welcome business opportunities. Since 2024, the total market's IPO underwriting amount was 52.14 billion yuan, -84.30% year over year, and equity refinancing underwriting amount was 191.97 billion yuan, -72.24% year over year. The equity financing market is still low. On the other hand, the policy increases support for mergers, acquisitions and restructuring of listed companies, and the merger, acquisition and restructuring business may cushion the decline in investment banking business to a certain extent.

Risk warning: Market sentiment is declining, equity financing is sluggish, wealth management business falls short of expectations, etc.

Investment advice: Based on the company's three-quarter report data and recent capital market conditions, we lowered the company's investment banking business growth rate, raised the company's annual exchange losses, and lowered the company's 2024-26 net profit to 4.561 billion yuan, 5.132 billion yuan and 5.565 billion yuan based on this, by 13.96%, 13.54% and 13.26%, respectively. Considering the company's leading ideas in terms of business innovation, the wealth management layout continues to deepen. I am optimistic that the company will build a moat in new business fields in the future and maintain the company's “superior to the market” rating.