Core views

Guotai Junan disclosed the results for the third quarter of 2024, with revenue +7.3% YoY, net profit to mother +10.4% YoY, and ROE 5.97%. Looking at a single quarter, the company achieved operating income of 11.93 billion yuan in 2024Q3, +37.2% year-on-year; net profit to mother was 4.51 billion yuan, +56.2% year-on-year.

By business: In the first three quarters of 2024, corporate brokering/investment banking/asset management/ investment/ credit business revenue was -13%/-32%/-8%/+39%/-3% to 44.5/ 18.0/ 28.6/107.1/ 1.57 billion yuan, accounting for 15%/6%/10%/37%/5% of revenue, respectively, accounting for -4%/-2%/+8%/-1% compared with the same period last year.

Brief review

Guotai Junan disclosed the results for the third quarter of 2024, with revenue +7.3% YoY, net profit to mother +10.4% YoY, and ROE 5.97%. Looking at a single quarter, the company achieved operating income of 11.93 billion yuan in 2024Q3, +37.2% year-on-year; net profit to mother was 4.51 billion yuan, +56.2% year-on-year.

The company's various businesses developed in a balanced manner in the second quarter, and the brokerage, asset management, investment and credit business led to a month-on-month improvement in the company's performance in the single quarter. Achieved operating income of 290 in the first three quarters of 2024.

0 billion yuan, +7.3% YoY, of which net income from brokerage fees was 4.45 billion yuan, -13% YoY; net income from investment banking fees was 1.8 billion yuan, -32% YoY, mainly due to a year-on-year decrease in stock underwriting revenue; Net income from asset management fees of 2.86 billion yuan, -8% YoY; Investment business revenue of 10.71 billion yuan (calculated as net income from investment plus income from changes in fair value - return on investment in associated enterprises and joint ventures), +39% YoY; Net interest income was 1.57 billion yuan, -3% YoY. Net profit to mother was 9.52 billion yuan, +10.4% year-on-year; weighted average ROE was 5.97%, compared with +0.35pct in the same period last year.

Looking at the asset structure, customer capital deposits were +23% month-on-month, +38% to 176.4 billion yuan, mainly affected by market conditions, and customer fund deposits increased; financing capital was +0% month-on-month, -6% to 83.15 billion yuan; 2024Q3's financial investment asset balance was 439.19 billion yuan, +1% year over year, of which the balance of transactional financial assets was 361.18 billion yuan, +0% year over year; the company's leverage ratio excluding client funds was 4.9x, compared with the same period + 0.

15x

Profit forecast and valuation: The company's revenue for 2024-2025 is expected to be 36.8/40.5 billion yuan, with a year-on-year growth rate of 2%/10%, and net profit to mother of 10.5/12.1 billion yuan, respectively, with a year-on-year growth rate of 12%/15%. At the closing price of October 31, 2024, the 2024-2025 PB valuation was about 1.04 and 0.99 times, giving it a “buy” rating.

Risk analysis

Drastic macroeconomic fluctuations, risk of investment losses: the risk of weak consumption and investment demand, the economic growth rate is under pressure throughout the year, and new customers for value-added services in the industry are constrained by the popularity of the equity market, or the risk of declining profits.

The risk of low capital market transaction activity: the risk of sluggish capital market conditions or a sharp decline in investors' trading activity, large fluctuations in the secondary market, etc.

Major policy changes have brought uncertainty to the industry: industry regulations are complex and varied, financial supervision is becoming stricter, the risk that comprehensive deepening of basic system reforms in the capital market will fall short of expectations, and if business models and business exhibition methods are affected by the new policies, there may be major changes, etc.

Furthermore, according to the National Equity Transfer Corporation, the company's targeted stock issuance business in September 2024 was not diligent and conscientious, and was required to submit a written commitment, which may have had a certain impact on the company's business development and stock price.