[There was a sharp negative increase in non-net profit in the third quarter, and overall performance fell short of expectations] Huatai Securities achieved adjusted revenue of 11.7/24 billion yuan in the Q3 quarter/ first three quarters of 2024, +61.1%/-0.9%; achieved net profit to mother 7.2/12.5 billion yuan, +138.0%/+30.6% YoY respectively; achieved deducted non-net profit of 1.1/6.3 billion yuan, respectively. In addition to the credit business, all other business lines of the company were under pressure. Proprietary revenue was net of AssetMark revenue. The year-on-year growth rates of broker/investment banking/asset management/credit/proprietary operations were -15.6%/-37.4%/-23.6%/+175.2%/-12.7%, respectively. In the first three quarters of 24 years, the year-on-year growth rates of broker/investment banking/asset management/credit/self-employment were -14.3%/-40.8%/-3.7%/+52.0%/-24.0%, respectively. ROE was 10.1%, +1.9pct compared to the same period last year; leverage decreased 0.66x to 3.58x.

[Asset-heavy business: Credit business bucked the trend, and proprietary business declined after deducting the sale of AssetMark] In terms of credit business, the company achieved credit business revenue of 0.59/1.3 billion yuan in the single quarter/ first three quarters of '24, respectively; in the context of the suspension of strict financial transfer regulations, the financing balance declined in the first three quarters of 24, and the balance of financing and securities lending at the end of September '24 was 1440.1/1430.7/9.5, respectively Billions of yuan, compared to -9.5%/-5.2%/-88.3% for the same period at the end of September 23, respectively. The company's credit business showed resilience, and revenue bucked the trend.

In terms of proprietary business, after deducting revenue from the sale of AssetMark, the company achieved proprietary business revenue of 1.62/5.84 billion yuan in the single quarter of Q24 and the first three quarters of '24, respectively, -12.7%/-24.0% compared to the same period last year. The size of proprietary financial assets declined in the first three quarters of 24, from -11.7% to 412.5 billion yuan. With a sharp recovery in the capital market and a 25.1% increase in the Shanghai and Shenzhen 300 range at the end of September (September 24 to September 30), the company's own revenue showed negative growth, which fell short of expectations.

[Asset-light business: The decline in market turnover combined with stricter regulatory policies has put pressure on the asset-light business] In terms of brokerage business, the company achieved brokerage business revenue of 3.97 billion yuan in the first three quarters of 24, -14.3%. Low market trading activity and shrinking volume were the main reasons for the decline in brokerage business. The cumulative daily turnover of the stock base in Q3 and the first three quarters of '24 was 804.6/921 billion, respectively, compared with -12.3%/-8.6% compared to the same period last year. Under pressure.

In terms of investment banking business, the company achieved investment banking revenue of 1.36 billion yuan in the first three quarters of 24 years, and the company's securities underwriting scale declined sharply due to the “tightening of the pace of IPO and refinancing” by regulatory policies targeting investment banking business. Among them, the IPO/refinancing scale was 5.91/16.36 billion yuan, respectively, -61.2% and -80.4%, respectively, significantly dragging down the company's investment banking revenue.

In terms of asset management, the company achieved asset management revenue of 3.03 billion yuan, -3.7% year over year. The main reason for the slight decline in asset management revenue was public offering fee reduction; the scale of non-commodity public equity management expanded slightly, and its non-commodity holding scale was 553 billion billion yuan, +7.3% year over year; Huatai Berry Fund (holding 49% of shares) had a non-goods holding volume of 378.7 billion yuan, +35.0% year on year; Huatai Asset Management (holding 100% of shares) had a non-inventory holding scale of 24.3 billion yuan. Billions, +14.9% YoY; the total holdings of the three companies were 437.5 billion, +18.0% YoY. Even though the scale of non-commodity public offering management was slightly expanded, overall asset management business revenue declined slightly due to public offering fee cuts.

Investment advice: We believe that the current policy dividends have been fully released, capital market sentiment is relatively positive, average daily turnover has risen sharply, and the corporate brokerage and finance business will directly benefit from the increase in turnover. At the same time, the newly created swap facility is expected to improve the flexibility of the company's net profit. Recently, the company's application to participate in the swap facility was approved by the Securities Regulatory Commission, and the future recovery of the capital market is expected to significantly increase net profit. According to the latest disclosed financial data, the profit forecast for 24/25/26 was updated. Net profit to the mother was 13.4/13.9/15.6 billion yuan before 24/25/26. Under the logic of increasing trading activity and superposition swaps to facilitate the release of flexible net profit space, it is now adjusted to 14.9/19.5/21.8 billion yuan in 24/25/26. Net profit from 24-26 is expected to grow at a year-on-year rate of +16.5%/+31.6%/+11.7%, maintaining the “buy” rating.

Risk warning: The capital market has fluctuated sharply; regulatory policies have changed; the development of proprietary business falls short of expectations.