According to the Zhito Finance APP, Kaiyuan Securities released a Research Report stating that the recent SFISF swap convenience second phase bidding has been completed, leading to an influx of incremental funds in the market. The high-level directives emphasize "stabilizing the real estate and stock markets," focusing on policies that promote the entry of medium to long-term funds into the market. Currently, the enthusiasm of individual investors entering the market remains high, and market trading activity is expected to maintain a high level. The number of new accounts in December has decreased month-on-month but remains high compared to the previous year, with attention on the increase of market Volume and Turnover Ratio central. This is bullish for the improvement of the Brokerage's fundamentals. Meanwhile, the traditional Brokerage's profit improvement has not yet been fully reflected in valuations, recommending undervalued leading Brokerages and being bullish on small to medium Brokerages with significant retail advantages and high earnings elasticity.

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.

Traditional brokerages are still undervalued, and the expectations for profit improvement in 2024 and 2025 have not been fully reflected. The announcements of performance forecasts by brokerages in January 2025 may serve as a catalyst for the sector.

(1) The bond market is expected to rise significantly in the fourth quarter of 2024, combined with active trading in the stock market. It is anticipated that the net income of listed brokerages will grow by +40% year-on-year for the entire year of 2024, with a certain proportion of listed brokerage firms expected to surpass a 50% growth rate, meeting the requirements for regulatory performance disclosures. Considering the performance in 2024, brokerage valuations remain low (traditional listed brokerages are expected to have a ROE of 7.0% vs 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.

The profit improvement of traditional brokerages has not yet been fully reflected in valuations. The performance pre-announcement in January is expected to become a catalyst for the sector. It is recommended to focus on undervalued leading brokerages, benefiting symbols like GTJA (601211.SH). Bullish on traditional brokerages with prominent Internet Plus-Related customer acquisition advantages and high retail trade income ratios, benefiting symbols like Guosen (002736.SZ) and China Merchants (06099,600999.SH). Pay attention to mid and small brokerages with high earnings elasticity, benefiting symbols like Orient (03958,600958.SH) and 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.