We have adjusted CITIC Securities' profit forecasts and valuations. We expect that policy measures to support the real economy and stabilize the capital market will continue to be introduced in the future, and leading brokerage firms will fully benefit from active stock market transactions. We raised our profit forecast, raised our target price to HK$25.0, and maintained our buying rating.

The profit growth rate for the third quarter turned positive. CITIC Securities' net profit to mother increased 2.3% year on year in the first three quarters, and the growth rate was positive compared to the first half of the year. Profit for the third quarter increased significantly by 21.9% year on year, mainly benefiting from the recovery in the stock market driven by policy expectations, and income from proprietary investment increased significantly year on a low basis.

Revenue growth is mainly due to income contributions from proprietary investments. Core revenue fell 3.8% year on year in the first three quarters. Among them, income from proprietary investment increased 37% year over year, contributing 13.7 percentage points to core revenue growth, but was offset by a year-on-year decline in investment bank handling income, net interest income, and exchange gains and losses. Core revenue for the 3rd quarter increased 12.5% year over year. The increase was mainly due to income contributions from proprietary investment. The increase in the 3rd quarter was 1.34 times year over year, but this was partially offset by a decline in net interest income and net exchange income.

The decline in asset-light income narrowed in the third quarter, but net interest income declined significantly. Net fee commission revenue for the 3rd quarter fell 6.4% year on year, and the decline narrowed; net interest income for the 3rd quarter was -0.2 billion yuan (RMB, same below), mainly due to the year-on-year decline in interest rates between the two loans and the increase in interest expenses on sales and repurchase.

Maintain a buy rating. Since the announcement of the financial policy on September 24, market confidence and risk appetite have increased significantly. Market transactions have been active. The average daily turnover of A shares in October was close to 2 trillion yuan, and the financing balance continued to rise. We expect there will still be policy space in the future, and leading brokerage firms will fully benefit from active stock market transactions. We raised our profit forecast and expect a 17.7% year-on-year increase in 2024. Based on a net market ratio of 1.1 times in 2025, we raised our target price from HK$17.0 to HK$25.0 to maintain our purchase.