Incident: In the first three quarters of 2024, the company achieved total revenue +13.61% to 0.776 billion yuan, net profit to mother -171.18% to -0.11 billion yuan, and net assets to mother +4.30% to 1.824 billion yuan compared to the same period last year. In the third quarter of 2024, the company achieved total revenue +34.50% YoY to 0.231 billion yuan, and net profit to mother -3.53% YoY to -0.061 billion yuan.

Key points of investment

The policy boosted market activity ushered in a turning point. Demand for software is expected to increase in the fourth quarter of 2024: in the first three quarters of 2024, capital market sentiment and average daily stock trading volume both declined year on year, and market activity continued to decline. However, due to a series of incremental policies issued since September 24, 2024, which boosted investor confidence, stimulated market activity, and improved market liquidity, the average daily turnover of A shares reached 1477.3 billion yuan from September 24 to 30. 1) The company's financial information service revenue declined year-on-year. The company's revenue for the first three quarters of 2024 was -0.73% to 0.595 billion yuan (accounting for 77% of total revenue), and -6% to 0.6 billion yuan in cash received from sales of goods and provision of labor services. 2) The structured market is conducive to C-side software sales. Overall, securities market transactions were sluggish in the first three quarters of 2024, but the capital market immediately boomed after the policy came into effect, and the average daily turnover of A-shares rose sharply. We expect retail demand for C-side products to further increase, and the company's financial information service business will have a positive impact in the fourth quarter.

The flow is smooth, emerging brokerage firms are developing rapidly, and the McGow Securities business is growing rapidly: since 2024, Compass has continued to direct traffic from its platform to McGo Securities. The diversion progress is stable and user activity is high. 1) The securities business was exhibited in an orderly manner and gradually entered a healthy development path. In the first three quarters of 2024, the average daily A-share transaction volume of the market was -13% to 646.9 billion yuan; ① The company's net revenue from handling fees and commissions was +126% to 0.135 billion yuan, and the company's brokerage business increased dramatically. ② The number of McGow Securities customers increased, and the amount of securities traded by the company's agents increased +117% compared to the beginning of the year; the net cash flow generated by the company's operating activities increased by +186% to 3.1 billion yuan, net cash flow from operating activities +187% year-on-year, and the net increase in cash and cash equivalents +247% year-on-year. The securities business developed in an orderly manner and entered a healthy development path. Considering the positive impact of a series of incremental policies on the capital market, we expect the company's brokerage business revenue to grow steadily with the support of the company's sizeable customer base and diversion experience. 2) The capital intermediary business is growing steadily, and the proprietary business is growing steadily. ① The company's net interest income for the first three quarters of 2024 was +92.70% to 0.046 billion yuan; ② As of 2024/09, Wandequan A/China Bond Composite Index was +8.25%/+4.70% respectively (-1.41%/+3.24% for the same period in 2023, respectively), and the company's own business revenue was +104% to 0.099 billion yuan (Note: Proprietary business income = investment income - joint venture income + fair value change income).

Profit forecast and investment rating: The company's financial information service business is highly correlated with capital market sentiment, and the securities business is in a stage of collaborative business growth (base is low, with potential for growth); with the rapid recovery of the capital market, we raised our profit forecast. It is estimated that in 2024-2026, the company's net profit to mother will be 0.106/0.153/0.211 billion yuan, respectively (previous value was 0.073/0.087/0.105 billion yuan), corresponding PE is 365/253/ 184 times, maintaining the company's rating and “increasing its holdings”. We look forward to the development of McGo Securities and are optimistic about the company's long-term growth.

Risk warning: The securities market is systemic, industry competition intensifies, and the recovery of securities business falls short of expectations