Matters:
Fangzheng Securities released its 2025 quarterly report. Total revenue after excluding other business revenue: 3 billion yuan, +49.2% YoY. Net profit to mother: 1.2 billion yuan, +0.95 billion yuan month-on-month, +52.4% year-on-year.
Reviews:
ROE increased significantly month-on-month, and last year's Q4 had a low base due to impairment and the like. The company's ROE during the reporting period was 2.5%, +0.8pct year over year, and +2pct month-on-month. Looking at DuPont's breakdown:
1) The company's financial leverage ratio at the end of the reporting period (total assets excluding customer funds) was: 3.93 times, -0.21 times year-on-year, and -0.2 times month-on-month.
2) The company's asset turnover ratio during the reporting period (total assets excluding customer funds, total revenue after excluding other business revenue) was 1.5%, +0.5pct year-on-year.
3) The company's net profit margin during the reporting period was 40.5%, +0.8pct year-on-year.
Looking at the balance sheet, after excluding customer capital, the company's total assets were 191.3 billion yuan, -0.04 billion yuan year on year, and net assets: 48.7 billion yuan, +2.52 billion yuan year on year. The leverage ratio was 3.93 times, -0.21 times year over year.
The company's interest-bearing debt balance was 116.7 billion yuan, -6.11 billion yuan month-on-month.
The total net revenue from the company's heavy capital business was 1.44 billion yuan. The net return on heavy capital operations (non-annualized) was 0.9%.
The return on heavy capital businesses all increased year over year. Looking at the breakdown: 1) The total revenue from the company's own business (change in fair value+net income from investment - net income from joint venture investment) was 1.08 billion yuan. The yield from self-employment in a single quarter was 1.5%, +1.8pct month-on-month and +0.4pct year-on-year.
In comparison, the average yield of active equity funds in a single quarter was +3.25%, -2.07pct month-on-month, and +6.84pct year-on-year. The average yield of pure debt funds is -0.2%. -1.62 pct month-on-month, -1.29 pct year over year.
2) Credit business: The company's interest income was 1.03 billion yuan, -0.116 billion yuan month-on-month. The scale of the two finance business was 43 billion yuan, +1.46 billion yuan compared to the previous month. The market share of the two finance loans was 2.24%, +0.28pct year-on-year.
3) Pledging business: The balance of financial assets purchased and resold was 5.2 billion yuan, -5.06 billion yuan month-on-month.
The brokerage business declined month-on-month due to trading volume. Brokerage revenue was 1.23 billion yuan, -29.3% month-on-month and +52.4% year-on-year. The average daily turnover during the comparison period was 1526.1 billion yuan, -17.7% month-on-month.
Investment banking business revenue was 0.02 billion yuan, stable month-on-month, -0.01 billion yuan year over year? Asset management revenue was 0.06 billion yuan, which was stable from month to month.
Investment advice: We are optimistic about the company's development opportunities under supply-side reforms in the industry. Considering the reversal in market sentiment and the company's excellent business fundamentals, we maintain profit expectations. We expect Fangzheng Securities's 2025/2026/2027 EPS to be 0.35/0.38/0.41 yuan, BPS will be 6.03/6.38/6.68 yuan, respectively. The PB corresponding to the current stock price is 1.23/1.17/1.11 times, respectively, and the weighted average ROE is 5.81%/6.20%/6.30%, respectively. Referring to the company's historical valuation, considering the current high overall market boom and the company's current business situation, we maintain the 2025 performance 1.6 times PB valuation forecast, with a target price of 9.65 yuan, and maintain the “recommended” rating.
Risk warning: Market trading volume declined; capital market innovation fell short of expectations; real economy recovery fell short of expectations.
