According to Zhitong Finance APP, Kaiyuan Securities has released a Research Report recommending undervalued leading Brokerages, Bullish on small and medium-sized Brokerages with prominent retail advantages and high earnings elasticity. Recently, the bidding for the second phase of SFISF swap convenience has been completed, and the market is welcoming incremental funds. The higher-ups have set the tone to 'stabilize the real estate and stock markets', focusing on policies to promote the entry of medium- to long-term funds into the market. Currently, the enthusiasm of individual investors entering the market remains high, and the market's trading activity is expected to maintain a high level, with the trading volume center likely to improve, which is Bullish for the improving fundamentals of Brokerages.

Event: The Shanghai Stock Exchange disclosed that in December 2024, the number of new A-share accounts opened was 1.989 million, a month-on-month decrease of 26%, and a year-on-year increase of 75%, with a total of 25 million new accounts opened in 2024, a year-on-year increase of 17%. Dongxing Securities announced on January 7 that it expects its net income attributable to the parent company to increase by 77% to 107% year-on-year in 2024.

KYG Securities' main points are as follows:

The number of opened accounts in December fell month-on-month but remains high year-on-year, with a focus on the improvement of market Volume and the Turnover Ratio center.

(1) The decline in the number of accounts opened in December meets expectations, noteworthy is that the year-on-year increase remains high (Brokerage accounts have a strong seasonal characteristic). The account opening data is a leading indicator for the influx of incremental funds into the market. Looking at the December data, the enthusiasm of individual investors entering the market remains high, which is likely to create favorable conditions for the increase in the market Volume center in 2025. The first quarter is historically a peak for Brokerages in account openings, pay attention to the year-on-year growth rate of newly opened accounts in January.

(2) From October 2024 to January 2025 (as of January 7, 2025), the daily average Turnover Ratios for the four months were 2.64%/2.55%/2.07%/1.60%. The peak Turnover Ratio in this round is close to the 2015 level, with attention to the low value level, which serves as a guiding role for subsequent Turnover Ratio centers. Since the '9.24' policy combination, market confidence has been boosted, the new 'Nine Articles' emphasizes investor protection and the coordination of investment and financing, strictly controlling the listing entrance, improving the quality of listed companies, encouraging dividends and buybacks, and introducing medium- to long-term funds, all of which are Bullish for investors' sense of achievement. In a market environment where individual investors' participation has increased, the Turnover Ratio is expected to exceed historical assumptions.

The profit improvement of traditional Brokerages has not yet been fully reflected in valuations, pay attention to the performance pre-announcements in January as a catalyst.

The valuations of traditional Brokerages remain low, not fully reflecting the profit improvement expectations for 2024 and 2025. The January 2025 announcements by Brokerages regarding the 2024 performance forecast may become catalysts for the sector. (1) With a significant rise in the bond market and active stock market trading in the fourth quarter of 2024, it is expected that the net income of listed Brokerages for the entire year of 2024 will increase by 40% year-on-year, and a certain proportion of listed Brokerages may see profit growth exceeding 50%, meeting the requirements for regulatory disclosure of performance forecasts. Considering the 2024 performance, the valuation of Brokerages remains low (expected 2024 traditional listed Brokerages ROE at 7.0% versus a PB valuation of 1.14 times).

(2) The performance base for the first quarter of 2025 is relatively low (the investment income from large proprietary businesses like derivatives in Q1 2024 was low). Assuming an average daily stock trading volume of 1.1 trillion yuan (as of January 7, the average daily stock trading volume in January was 1.21 trillion yuan), it is expected that the net income of listed Brokerages in Q1 2025 will increase by over 60% year-on-year, with some small and medium Brokerages and those with prominent retail advantages having stronger year-on-year elasticity.

Recommend undervalued leading Brokerages, Bullish on small and medium Brokerages with prominent retail advantages and high performance elasticity.

Recently, the second phase of the SFISF swap facilitation tender has been completed, with the market welcoming incremental funds. High-level officials have set the tone to stabilize the real estate and stock markets, focusing on policies that promote mid-to-long term funds entering the market. Currently, the enthusiasm of individual investors for entering the market remains high, and market trading activity is expected to maintain a high level, with the trading volume central expected to increase, Bullish for the fundamental improvement of Brokerages. It is believed that the profit improvement of traditional Brokerages has not yet been fully reflected in valuations, and the performance pre-announcement in January is expected to become a catalyst for the sector. Recommend undervalued leading Brokerages, benefiting the symbol GTJA (601211.SH), and Bullish on traditional Brokerages with prominent Internet Plus-Related advantages and high retail business income ratios, benefiting symbols Guosen (002736.SZ), China Merchants (600999.SH). Pay attention to small and medium Brokerages with high performance elasticity, benefiting symbols Orient (600958.SH), First Capital (002797.SZ).

Risk warning: Stock market volatility may affect the industry’s proprietary investment income; the sustainability of high trading volume driven by individual investors remains uncertain.