Incident: Everbright Securities released its semi-annual report for 2023. The performance was consistent with previous reports and better than expected. 1H23 achieved revenue of 6.18 billion yuan/yoy +15%, return profit of 2.39 billion yuan/yoy +13.5%; of these, 2Q23 had revenue of 3.43 billion yuan/qoq +25%, and return profit of 1.43 billion yuan/qoq +50%. 1H23 weighted average ROE (unannualized) of 3.94%, +0.33pct year-on-year.
Investment income is the backbone of revenue. Higher year-on-year increases drive performance improvements, while the rest of the business lines all declined year-on-year. 1H23 achieved main securities revenue of 5.72 billion yuan (excluding bulk commerce, government subsidies, etc.) /yoy +12%. Among them, brokerage, investment banking, asset management, net interest, and net investment (including exchange) revenue was 14.8, 6.2, 4.8, 8.9, and 2.15 billion yuan, respectively, -13%, -24%, -28%, -28%, and +266%, respectively. 1H23 The main revenue composition is as follows: net investment (including exchange) accounts for 37.6%, brokerage 25.9%, net interest 15.5%, investment banking 10.8%, and asset management 8.3% (other handling fees and long-term stock investment together account for 1.9%). 2Q23 Net profit increased month-on-month, and net profit growth rate was significantly higher than revenue growth rate, mainly due to 1) falling management rate month-on-month: 2Q23 management fee rate 48.4% /qoq-9.8pct; 2) Significant increase in non-operating expenses: 2Q23's non-operating expenses were 65 million yuan/qoq+63 million yuan (2Q22 was 04 billion yuan), mainly due to the expected sharp increase in debt calculation over the previous year (1H23 billion yuan, 63 billion yuan vs. 1H22, 0).
Operating leverage increased slightly, investment scale expanded steadily, and return on investment improved markedly. At the end of 1H23, the company's total assets were 262 billion yuan, up 1.4% from the beginning of the year; net assets were 65.4 billion yuan, up 2.1% from the beginning of the year; operating leverage was 3.02 times, an increase of 0.06 times over 2022. At the end of 1H23, the company invested assets of 127.7 billion yuan, +5.5% from the beginning of the year, of which transactional and derivative assets were 96.6 billion yuan, up 3.7% from the beginning of the year, and investment leverage 1.95 times, an increase of 0.06 times over the beginning of the year; the estimated annualized return on investment was 3.46% /yoy+2.33pct.
The number of brokerage customers increased steadily. The average customer assets declined slightly year on year, and the scale of consignment sales increased by more than 90% year on year. In terms of retail business, the company continued to grow its customer base. 1H23's total customer base was 5.66 million, up 5% from the beginning of the year; 1H23's customer assets were 1.3 trillion yuan, up 2% from the beginning of the year; average customer assets of 229,700 yuan/person/ down 5% from 22; net agent revenue of 890 million yuan/yoy -11%; in terms of wealth management business, 1H23's financial product consignment scale was 20.35 billion yuan/yoy +97%, accounting for 180 million yuan/yoy -8%, accounting for net revenue from brokerage business 14% In terms of the scale of public sales holdings, as of 2Q23, Everbright Securities's non-stock public holdings and share+mixed public offering holdings were 282.2 billion yuan and 25 billion yuan respectively, ranking 19th among securities companies.
The profit contribution of large asset management declined year-on-year, and they are optimistic about the transformation of Guangzheng Asset Management into a public offering in the second half of the year. 1H23 Big Asset Management contributed a total profit of 503 million/yoy +0.2%, accounting for 11.1% /yoy-1.54 pct: Guangzheng Asset Management (wholly-owned subsidiary) net profit of 163 million /yoy+4%, Everbright Prudential (55% holding) net profit of 55 million/yoy -26%, and Dacheng Fund (holding 25%) net profit of 285 million/yoy +5%. Looking at asset management AUM, 1H23 Suguang Asset Management's total fiduciary management scale was 305.5 billion dollars, a decrease of 16.4% from the beginning of the year. According to data from the China Foundation Association, 2Q23 Guangguang Asset Management ranked 5th in the industry in terms of the average monthly scale; according to Wind data, 1H23 Dacheng's asset management scale was 73.5 billion/yoy +14%, and the industry ranked 55/197; 1H23 Shedacheng Fund's non-cargo base size was 166.9 billion/yoy +1%, ranking 28/197.
Optimistic about business expansion in the field of public funds: According to the company announcement, on 6/19, the Securities Regulatory Commission has received the application materials for the public offering license from Guang Securities Asset Management.
The scale of equity and bond underwriting in the investment banking business is under pressure, and the performance of IPO reserve projects is yet to be released. According to Wind data, according to the issuance date, in terms of equity financing business, 1H23 underwrote 5 IPO projects and 1 refinancing order. The total underwriting scale was 4,212 billion yuan/yoy -65%, of which the IPO business owner underwrote 4.132 billion yuan/yoy -52%. In terms of debt financing business, 1H23's principal underwriting scale is 178 billion yuan/yoy -18%, ranking 10th in the industry (1H22 industry ranked 6th).
In terms of project reserves, the last company in 1H23 had 28 IPO projects in line, ranking 20th in the industry.
Investment analysis opinion: Raise profit forecasts and maintain holdings growth ratings. Capital market investment and financing side and transaction side reform policies have been introduced at an accelerated pace. Market trading continues to pick up, and the company's performance in the second half of the year is expected to improve year on year. We have raised our market turnover and asset management scale assumptions, thereby raising our profit forecast. We expect the company's 23-25E net profit to be 44, 49, 5.5 billion yuan (assuming 34.6, 40.7 billion yuan, 4.67 billion yuan), an increase of 39%, 11% year-on-year, maintaining a rating increase of 39%, 11%.
Risk warning: The Fed's interest rate hike exceeded expectations; macro-level liquidity was tightened, and the process of residents' capital entering the market was slowing down.