Description of the event

Compass announced its 24-year semi-annual results today. The main situation is as follows: In the first half of 2024, the company achieved total operating revenue of 0.545 billion yuan, yoy +6.58%. Achieved net profit attributable to shareholders of listed companies - -0.049 billion yuan, yoy -366.48%. In the first half of 2024, McGow Securities's securities business achieved revenue of 0.164 billion yuan, yoy +118.72%, and the financial information services business achieved revenue of 0.423 billion yuan, yoy -4.40%.

Incident comments

In the first half of 2024, cash received from sales of goods and provision of services was $0.489 billion, down 4.63% from the same period last year. Net cash flow from operating activities was $1.181 billion, an increase of 16.14% over the same period last year, mainly due to increased customer deposits in the McGow Securities brokerage business. In terms of total assets, as of the end of the first half of 2024, the company's total assets were 6.899 billion yuan, an increase of 27.03% over the end of the previous year, mainly due to the expansion of the brokerage business of McGow Securities.

The increase in three fees+the decline in revenue from financial information services is the main reason for the decline in performance. The company's revenue is highly correlated with capital market prosperity. Although securities market transactions were sluggish in the first half of the year, the company continued to focus on future business development, continued to expand brand promotion and customer development efforts, and continuously improved the efficiency of various businesses, which led to a marked increase in sales expenses. At the same time, R&D and management costs have also increased accordingly.

In addition to cost-side pressure, the main reason for the decline in the company's profit is that the company's cornerstone business financial information service revenue declined in response to market influence. Revenue from financial information services is highly correlated with capital market sentiment (key indicators such as turnover). Securities market transactions were sluggish in the first half of 2024, and the total transaction amount of A shares decreased compared to the same period last year; the company's financial information service business achieved operating cash inflow of 0.475 billion yuan during the same period, down 3.41% from the same period last year, which was one of the main reasons for the decline in the company's profit during the reporting period. However, it is important to note that the company's financial information service is characterized by an uneven distribution of operating performance throughout the year, and the results for the reporting period cannot accurately reflect the 2024 full-year results.

McGow Securities has seen impressive growth, and all aspects of the fixed increase are progressing normally. The company leverages the synergetic advantages of its own business to promote the healthy exhibition of McGow Securities. By business, McGow Securities achieved net revenue of 82.2187 million yuan in handling fees and commissions, an increase of 138.08% over the same period of the previous year; realized net interest income of 27.4925 million yuan, an increase of 107.89% over the same period of the previous year; realized investment income of 50.7694 million yuan, an increase of 146.58% over the same period of the previous year; and net profit of 9.8471 million yuan, an increase of 142.52% over the same period of the previous year. At the end of the first half of 2024, securities transactions were 3.622 billion yuan, an increase of 78.31% over 2.031 billion yuan at the end of the first half of 2023.

We believe that the market environment has had a certain impact on the company's performance release, but the company actively exploits the synergistic advantages of its own business, strives to build a second growth curve with McGow Securities as the core, and enhance its core competitiveness. In 2024-2026, the company is expected to achieve operating income of 1.367/1.775/2.081 billion yuan and net profit to mother of 1.22/ 0.292/0.455 billion yuan, corresponding PE of 312.49/131.21/84.07 times.

Risk warning

1. The turnover of the two markets dropped sharply;

2. Tightening of regulatory policies;

3. Risk that profit forecasting assumptions are untrue or fall short of expectations.