Introduction to this report:

Due to the Q1 base, earnings for the first three quarters were still under pressure. The current focus is on the acceleration of the merger and acquisition of Minsheng Securities. Starting again from a new starting point, we are looking forward to the results of the merger.

Key points of investment:

Maintaining the “gain” rating, the target price was raised to 14.05 yuan, corresponding to 2.2 xPb in 2024.

The company's revenue/net profit for the first three quarters of 2024 was 2/0.4 billion yuan, -20.0%/-45.5% YoY, of which Q3 net profit was 0.31 billion yuan, +143.7% YoY/+0.5% YoY; the weighted average ROE was -2.02 pct YoY to 2.18%. The implementation of the company's acquisition of Minsheng Securities has been accelerated. The merger and acquisition is preparing for long-term development, and we look forward to the results of the merger. The 24-26 profit forecast was raised to 0.24/0.26/0.29 yuan (previous value was 0.22/0.25/0.29 yuan). Considering the strong market boost since 9/24, the target price was raised to 14.05 yuan, corresponding to 2.2xPb in 2024, maintaining the “gain” rating.

Quarterly results from a low base showed a high year-on-year increase; talent investment and business transformation results are gradually showing, and the brokerage business is bucking the trend. 1) The company's Q3 profit more than doubled year-on-year, mainly due to profit pressure due to fluctuations in the stock and bond market last year. 24Q3 investment revenue recorded 0.55 billion yuan, +220% year over year, driving a significant increase in profit, with a slight increase of 5% over the previous month; 2) The company's talent investment and business transformation results gradually showed, supplementing talent reserves such as wealth management and research business in recent years, driving the brokerage business contrarian growth. The company's brokerage business revenue in the first three quarters was 0.4 billion yuan/+2.1% year over year, which is expected to be significantly superior to peers.

The implementation of the merger and acquisition of Minsheng Securities has been accelerated, and we are starting again from a new starting point. We look forward to the results of the merger. On the evening of 9/27, the company announced that the merger and acquisition of Minsheng Securities had been accepted by the Securities Regulatory Commission and the Shanghai Stock Exchange respectively, and the implementation of the merger and acquisition was accelerated. As a medium-sized brokerage firm with distinct investment banking business characteristics, Minsheng Securities is comparable in size to Guolian Securities. It is expected that the synergy between the two will be regional complementarity and business complementarity after merger. More importantly, through the merger of Minsheng Securities, the comprehensive strength of Guolian Securities may rise to the top 20 in the industry. On this basis, the company's governance advantages are expected to be further exploited, preparing for long-term development, and looking forward to the results of the merger.

Catalyst: Promoting mergers and acquisitions with Minsheng Securities

Risk warning: The equity market fluctuates greatly; mergers and acquisitions are progressing less than expected.