With the continuous release of policy dividends, Brokerages are expected to ride the wave.
According to Zhitong Finance APP, Tianfeng has released a Research Report stating that the Brokerage Industry maintains a trend of concentration at the top, achieving a situation where the strong get stronger, with the significant increase in proprietary business growth being the main driving force behind high performance. With continuous policy dividends being released, Brokerages are expected to ride the wave, and it is recommended to pay attention to leading brokerages such as China Galaxy (601881.SH) and Guotai Junan (601211.SH) that have a high proportion of brokerage and margin trading businesses, as well as Internet brokerages with greater elasticity.
Tianfeng's main viewpoints are as follows:
In 2024 and the first quarter of 2025, performance is expected to rebound significantly, with brokerage and proprietary businesses being the main drivers of high performance.
1) In the first quarter of 2025, the overall revenue and profit levels of listed brokerages will show a significant rebound, with an increase in ROE: For 2024 and Q1 2025, the adjusted operating revenue of listed brokerages increased year-on-year by 3.1% and 27.9%, respectively; the net income attributable to shareholders increased year-on-year by 15.1% and 79.0%, respectively; the average annualized ROE of listed brokerages in Q1 2025 was 8.2%, an increase of 3.5 percentage points compared to the same period in 2024.
2) In Q1 2025, revenue from proprietary and brokerage businesses saw a significant increase, while other business lines remained stable: In Q1 2025, the year-on-year growth rates of revenue from proprietary, brokerage, credit, investment banking, asset management, and Other businesses were +46.0%, +43.4%, +11.4%, -1.5%, -5.7%, and -20.2%, respectively.
Competitive landscape: The industry maintains a trend of concentration at the top, achieving a situation where the strong get stronger; from the perspective of performance elasticity: the significant increase in proprietary business growth is the main driving force behind high performance.
Policy dividends are continuously being released, and brokerages are expected to ride the wave. It is recommended to focus on leading brokerages (China Galaxy/Guotai Junan) with a high proportion of brokerage and margin trading businesses, while also paying attention to Internet brokerages with greater elasticity.
1) Market situation on the beta level: The policy continues to be strong, progressing from "stabilizing the stock market" to "sustained stability in the capital markets". A series of policy measures work together to stabilize the market, and the trading volume in capital markets as well as overall sentiment are expected to continue to improve, which is Bullish for the confidence of the Brokerage sector.
2) Market situation on the alpha level 1: With signs of an active capital market, Brokerages with a high proportion of revenue from brokerage and margin financing businesses are expected to see significant improvements in their fundamentals: It is anticipated that the brokerage and margin financing businesses, which directly benefit from increased trading activity, will be relatively advantageous. Attention is recommended towards Brokerages with high revenue proportions from brokerage and margin financing (China Galaxy/HTSC) and those with greater flexibility in the Internet Brokerage sector.
3) Market situation on the alpha level 2: The recovery of the capital markets is highly beneficial for proprietary businesses and is likely to increase Net income: With policy dividends being fully released, future market sentiment in the capital markets is expected to further warm up. As the scale of proprietary assets continues to expand, an upward trend in investment returns may significantly improve the marginal changes in Net income growth and enhance the level of ROE. The main objective now is to find relative certainty amidst uncertainty, suggesting attention to leading Brokerages with better asset allocation and effective risk management: China Galaxy/Guotai Junan.
Risk warning: Policy effects may not meet expectations, significant fluctuations in the capital markets, continued sluggishness in the securities market, and intensified changes in external environments.
