After a round of general rally, the brokerage sector has begun to adjust, and then, the trend of individual stocks may produce structural differentiation.
Goldman Sachs Group recently released a research report on the latest valuation model analysis of China's A-share brokerage stocks which have risen rapidly recently. The analysis results show that there is limited upside space for some stocks.China MerchantsA shares,Everbright SecuritiesA shares are downgraded to "sell", with target prices of 22.44 yuan and 18.27 yuan respectively for the next 12 months.HaitongA shares,Guangfa SecuritiesA shares were downgraded to "neutral", with target prices of 16.28 yuan and 18.53 yuan respectively for the next 12 months.
After a sharp correction in A shares in recent days, the brokerage sector has also made a pullback. However, Everbright Securities and China Merchants share prices remain high, at 27.61 yuan and 28.59 yuan respectively, with 34% and 22% pullback room from the target price.
In addition, Goldman Sachs Group recommended China International Capital Corporation H-shares in the research report, and given a "buy" rating to China International Capital Corporation H-shares under the action of multiple factors such as the expected A-share IPO, steady profit growth during the year and financial technology.
Four A-share brokerage shares were downgraded
Gao Sheng Research said that in the past two weeks from June 20 to July 6, Chinese brokerage stocks have rebounded significantly, which seems to be driven by capital market reforms, such as the gem registration system, banks will be granted brokerage licenses, rumors of a merger of the two leading brokerages, etc., but the factor supporting the rally is still the bullish A-share market. Goldman Sachs Group agrees with the benefits of the above reforms, but the impact of these events may take three to five years to become apparent. These catalysts are not enough to further support the recent strong industry rebound.
In this research report, Goldman Sachs Group adjusted the rating of four A-share brokerage stocks, of which Everbright Securities and China Merchants were downgraded to "sell" because of overvaluation.
Goldman Sachs Group updated his target valuation multiple for Everbright Securities A shares, increasing earnings per share from 20.2 times to 20.4 times in 2020 and changing the share price over the next 12 months from Rmb11.81 to Rmb18.27, down 35 per cent from the current price. At the same time, China Merchants's share price in the next 12 months is set at 22.44 yuan, which means there is 22% room for downside.
Goldman Sachs Group adjusted the A-share rating of GF Securities Co., LTD. and Haitong to "neutral".
GF Securities Co., LTD. 's downgrade from "buy" to "neutral" is due to "weak business prospects". Goldman Sachs Group believes that the biggest disturbing factor for this stock is the administrative penalties imposed on it by the CSRC. GF Securities Co., LTD. 's investment banking income was cut by-56% and-18% in 2021. Through the valuation model, it is concluded that the target price for the next 12 months is 18.53 yuan.
In addition, Goldman Sachs Group lowered Haitong's A-shares to neutral according to the relative level of the industry. By revising the valuation model, the target price of Haitong A shares in the next 12 months is raised from 14.9 yuan to 16.28 yuan. Goldman Sachs Group is still optimistic about Haitong's fundamentals, but according to the upward space ranking covering the target price of securities firms, Haitong was downgraded to a neutral rating. Still maintain the buy rating of Haitong's H shares.
The current valuation of Everbright and investment promotion may be too high.
Let's review the recent rise in A-share brokerage stocks.
According to the range mentioned in Goldman Sachs Group's research report, Everbright Securities and China Merchants were indeed the two biggest gainers between June 22 and July 6, with the former rising 91.79% and the latter up 64.86%.
And further extend the range to July 16, Everbright Securities A-share range has reached 128.94%, the biggest increase in brokerage stocks; China Merchants rose 61.25%, the overall increase in A-share brokerage shares in the top three.
It is worth noting that Everbright Securities recently issued a series of risk reminders on abnormal stock fluctuations, and the company's price-to-earnings ratio is significantly higher than the industry average. To July 15, Everbright Securities price-to-earnings ratio (TTM) of 369.66 times, the highest in the industry, the industry as a whole price-earnings ratio of 38.7 times. In terms of Everbright Securities's latest closing price of 27.61 yuan per share, there is 34% room for adjustment.
After combing, it was found that the seller's research last issued a stock research report on Everbright Securities on May 10, which was issued byGuoxin SecuritiesIssued, it is suggested to "increase the holdings". Since then, no other research institutions have recommended the stock; China Merchants has not reported a single stock since he entered May, but at the end of April, GF Securities Co., LTD.,Founder Securities、 Haitong 、Citic Construction InvestmentA number of securities firms, such as "buy" or "increase" China Merchants A shares.
Haitong's rating was adjusted to "neutral".
According to Goldman Sachs Group's research report, Haitong was actually adjusted because the increase did not outpace the industry, which will have an impact on investor sentiment.
Combing and findingTianfeng SecuritiesNon-bank analyst Luo Zhuanhui issued a research report to Haitong on June 10, saying that because he was allowed to issue no more than 20 billion yuan of shares in a non-public offering, it is expected to further consolidate the company's capital strength and lay a solid foundation for the company's business optimization and transformation. At that time, the company's share price was 12.08 yuan, due to "market activity improvement + positive policy is expected to exceed expectations," to maintain the "buy" rating.
As Goldman Sachs Group said in the research newspaper, he is still optimistic about Haitong's fundamentals.
The risk factor is the poor performance of the Hong Kong market and the slowing growth of Haitong's international performance. Recently, Haitong International is deeply involved in the whirlpool of rising coffee fraud, which is a major risk event for the company.
GF Securities Co., LTD. was downgraded because of his weak performance outlook.
Let's take a look at GF Securities Co., LTD.. Deeply affected by the counterfeiting case of Kangmei Pharmaceutical Co., Ltd., on July 10, the Securities Regulatory Commission suspended GF Securities Co., LTD. from being a sponsor for six months, and temporarily refused to accept relevant documents of bond underwriting for 12 months. This "price of violators" will deal a heavy blow to GF Securities Co., LTD. 's investment banking business.
From July 10 to July 16, GF Securities Co., LTD. 's A shares fell 13.77%, from a high of 18.32 yuan to 15.91 yuan. According to the public information, after entering May, no seller's organization issued a stock research report to GF Securities Co., LTD..
This stock is highly recommended.
It is worth noting that Goldman Sachs Group not only downgraded four brokerage stocks in the research report, but also recommended a brokerage H-share in the research report.
The recommended stock is China International Capital Corporation H-share, rated as "buy". There are three reasons: first, the expected A-share IPO, whose valuation and fundamentals are expected to benefit H shares; second, steady earnings growth in 2020, expected to grow by 29% compared with the same period last year, thanks to its less market-related business model; and third, the establishment of a financial technology company with Tencent in late June, which will help it expand its wealth management business platform.
On 22 June, CSC FINANCIAL CO.,LTD also issued a research report to China International Capital Corporation, believing that although China International Capital Corporation and Morgan Stanley had "peacefully broken up" for a long time, China International Capital Corporation still retained a lot of Morgan Stanley's imprint on his development strategy. With the promotion of capital market reform and the deepening of opening up to the outside world, China International Capital Corporation's international fund will give it unique core competitiveness.
CSC FINANCIAL CO.,LTD is optimistic about China International Capital Corporation's valuation repair market this year, as well as the long-term market driven by profit growth. It is predicted that the EPS of China International Capital Corporation from 2020 to 2021 is 1.15x1.33 yuan respectively, an increase of 15.92%, 15.61%, 12.20 and 13.53 yuan respectively over the same period last year, and an increase of 10.38%, 10.87% and 10.31% respectively over the beginning of the year. It is estimated that China International Capital Corporation's target price by the end of 2020 will be equivalent to HK $18.53, giving China International Capital Corporation (3908.HK) a "buy" rating.
