Description of the event

CICC released its 2024 three-quarter report. During the reporting period, it achieved operating income of 13.45 billion yuan, -23.0% year on year, realized net profit to mother of 2.86 billion yuan, or -38.0% year on year, and a weighted average return on net assets of -2.20 pct to 2.64% year on year.

Incident comments

Other than its own business, the company is under pressure. In the first three quarters of 2024, CICC achieved revenue and net profit of 13.45 and 2.86 billion yuan, respectively, of -23.0% and -38.0% year on year, weighted ROE of 2.64%, -2.20pct year on year, and leverage of 5.06x after excluding customer funds, or -2.8% year on year. By business line, revenue from brokerage, investment banks, asset management, and proprietary operations was 25.6, 2.06, 0.84, and 7.47 billion yuan, respectively, -27.1%, -21.4%, -11.7%, and +6.8% year-on-year respectively.

The influence of cross-border business continues to grow, providing first-class global capital market services. 1) As one of the first “HKD-RMB Dual Counter Model” market makers, it won the Hong Kong Exchange's “Most Active RMB Counter Market Maker” award to help the internationalization of RMB; 2) Overseas teams cooperate to implement multiple primary and secondary market projects to introduce overseas strategies and cornerstone investors to actively attract long-term capital into the market; 3) The company focuses on expanding emerging markets and customers in “Belt and Road” countries to help CICC expand overseas business and improve the level of comprehensive customer service.

The market share of the company's credit business increased year-on-year. The cumulative daily turnover for the first three quarters of 2024 and Q3 was 797.3 and 677.5 billion yuan respectively, -10.6% and -15.1% year-on-year respectively. The cumulative year-on-year growth rates of CICC's brokerage business revenue for the first three quarters and Q3 were -27.1% and -22.1%, respectively. The decline in the company's brokerage business revenue was higher than the market decline. At the end of Q3, the company estimated that the market share of financing capital was 2.40%, +0.11pct compared to the previous year, which is an overall increase.

The share of equity and bond underwriting market has increased. In the first three quarters of 2024, the company's equity size was 31.983 billion yuan, -68.4% year on year, estimated market share was 16.2%, +4.93pct year on year; bond underwriting scale was 848.687 billion yuan, +3.6% year on year, estimated market share was 8.6%, +0.23pct year on year.

Proprietary assets continued to expand, and return on investment increased markedly. 2024Q3's proprietary investment in a single quarter reached 3.21 billion yuan, +25.0% and +32.8%, respectively. As of the end of the third quarter of 2024, the company's financial assets were 352.86 billion yuan, +0.7% compared to the beginning of the year. The estimated return on financial asset investment was 2.24%, +0.24pct year-on-year. The company's net stable capital ratio was +7.83 pct to 140.25% at the end of the previous year, and it has strong risk resilience.

Over the long term, we will continue to be optimistic that CICC will establish competitive advantages in brokerage, investment banking, asset management and trading with its excellent charging business and balance sheet utilization capabilities, and achieve a steady increase in ROE through customer demand business and wealth management business. The company's corresponding net profit for 2024-2025 is estimated to be 70.40 billion yuan and 8.313 billion yuan. The corresponding H share PE is 8.89 and 7.53 times, and the PB is 0.56 and 0.52 times, respectively, maintaining the purchase rating.

Risk warning

1. A sharp correction in the equity market;

2. Regulatory policies have been tightened.