Core views:

The company disclosed its 2024 three-quarter report, and performance rebounded. In the first three quarters of 2024, the company achieved revenue of 8.811 billion yuan, -0.5% YoY; net profit to mother was 1.32 billion yuan, or -16.5% YoY. Net profit to mother in Q3 was 0.378 billion yuan in a single quarter, turning a loss into a profit.

The total assets of the company in 2024Q3 were 277.7 billion yuan, down 4.5% year on year. The weighted average ROE was 2.64%, an increase of 4.16 pct over the same period last year. The leverage ratio excluding clients' funds increased to 3.62, an increase of 0.14 over the previous year.

The investment business picked up, and investment banks and brokerage declined due to the downturn in the market. In terms of asset-heavy business, (1) in the first three quarters, net investment income (including fair value) was 2.222 billion yuan, up 165% year on year; net investment income for Q3 was 1.033 billion yuan. The company's Q3 transactional financial assets declined 1% from the beginning of the year.

(2) Net interest income for Q3 was 0.284 billion yuan, -34% year over year; 0.879 billion yuan in the first three quarters, down 38.5% year on year. At the end of September, the market balance of two loans was 1440.1 billion yuan, -9.5% YoY. In terms of asset-light business, (1) the average daily transaction volume of the entire market in Q3 was -16%, and the net revenue of brokerage business in a single quarter in Q3 was 0.387 billion yuan, -28% year-on-year. (2) Q3 Asset Management's net revenue for a single quarter was 0.04 billion yuan, the same as the same period last year; according to Wind data, the Q3 non-commodity scale of Joint Venture Capital Fund/China Southern Fund was 279.2/695.9 billion yuan, respectively, -1.5%/+29.0% compared to the same period last year. (3) Net income from investment banking business was 0.179 billion yuan in a single quarter, -7% year on year; net revenue from investment banking business in the first three quarters was 0.442 billion yuan, or -43.19% year over year. According to Wind's release date data, the total equity financing amount in the 23Q3 market was 58.7 billion yuan, -82% year over year, and the company's equity underwriting was 0.233 billion yuan, -84% year over year.

Profit forecasting and investment advice. Guided by the “strive to boost the capital market” policy, the capital market is expected to usher in new opportunities for development, and the equity market is expected to recover. The company is expected to continue to benefit from comprehensive services, collaboration capabilities, and asset management capabilities. The company is expected to achieve net profit of 2.35 billion yuan and 2.98 billion yuan in 2024-2025. Considering that the company's valuation center has been 1.3 xPB since 2019, the company is valued at 1.2 XPB in 2025, with a reasonable value of 8.25 yuan per share, maintaining a “buy” rating.

Risk warning: declining commission rates, increased industry competition, increased market volatility, etc.