Incident: CITIC Construction Investment released its semi-annual report for 2023. 1H23 achieved net profit of 4.31 billion/yoy -2%, 2Q quarterly profit of 1.87 billion/yoy -34% /qoq -23%. 1H23 revenue was 13.46 billion/yoy -7%, 2Q quarterly revenue was 6.76 billion/yoy -16%. 1H23 weighted average ROE was 5.41% /yoy-0.58pct.
Profit after deduction remained positive, and the capital business drove growth. The main revenue of 1H23 corporate securities was 11.67 billion dollars (excluding trade and government subsidies, etc.), +8% over the same period last year. 1) Revenue split: 1H23 brokerage, investment banking, asset management, net interest, and net investment (including net exchange income) achieved revenue of 27.9, 26.2, 6.1, 10.8 billion yuan, and 4.37 billion yuan, respectively, compared to -9%, -7%, -3%, +11%, and +43%, respectively. 2) Looking at the performance composition, light capital income accounted for about 53% (brokerage 24%, investment banking 23%, asset management 5%), and heavy capital income accounted for 47% (net interest 9%, investment income 37%); 3) Negative profit growth was mainly due to the Amethyst Storage Special Fund's accrued expenses of 970 million yuan, after deducting net profit of +15% from non-return net profit.
Investment leverage has been steadily expanding, and the OTC derivatives business continues to grow. The company's operating leverage at the end of the period was 4.55x/qoq+0.15x/compared to the end of the 22nd +0.25x, the investment leverage (financial investment assets/net assets) 2.99x/qoq+0.16x/compared to the end of the 22nd +0.19x, and the financial investment scale was 285.3 billion yuan/qoq +5% /compared to +9% at the end of the year 22. investment leverage expanded steadily; estimates showed that 1H23's annualized investment yield was 3.20% /yoy+0.3pct, with a slight improvement in yield. The OTC derivatives business has further enriched the types and revenue structure of linked targets, and continued to expand the target of the cross-border derivatives business. The nominal size of derivatives at the end of the period was 724.2 billion yuan/+22% compared to the end of '22, of which the nominal equity size was 232.6 billion yuan/+52% compared to the end of '22, and the amount payable for derivatives business (mainly customer security deposits) was 25.1 billion yuan/+15% compared to the end of '22.
The leading position in the investment banking business has been consolidated, and project reserves are abundant. 1) Maintaining investment banking business advantages: 1H23's IPO underwriting scale is 28.1 billion, market share of 12.8%; refinancing scale of 48 billion dollars, market share of 14.2%; bond underwriting scale of 687.8 billion, with a market share of 11.1%, all ranking 2nd in the industry, with outstanding leading advantages; 2) Investment banking project reserves rank at the forefront, and are expected to benefit from the comprehensive registration system in the long term: the company currently has 67 IPOs under review and 68 refinancing companies (excluding cases of non-registration, termination of review, and suspension of review), all ranked 2nd in the industry.
The brokerage business outperformed peers, and Liangrong's market share increased. 1) Wealth management deepened transformation, and the share of consignment revenue increased: 1H23 company's brokerage revenue was 2.79 billion yuan/yoy -9%, superior to peers (44 listed brokerage firms -11%). Among them, consignment financial products business revenue was 4.4 billion yuan/yoy -3%, market share 6.29% /yoy+0.24pct, and the industry ranking rose 2 places to 5th place; 2) Credit business ranked 2 billion yuan/yoy +11%, of which 1H23 company's net interest income was 1.08 billion yuan/yoyoy +11% +4 %, the balance of the two loans was 60.8 billion yuan/yoy +2%, market share was 3.83% /yoy+0.13 pct; 180,500 securities financing accounts /yoy +4%.
Investment analysis opinion: Give a “recommended” rating. It is estimated that in 2023-2025E, CITIC Construction Investment's net profit will be 8.7 billion yuan, 10.5 billion yuan, and 12 billion yuan, respectively, +16%, +21%, and +15% year-on-year. The 8/30 closing price corresponds to the company's 23-25E dynamic PB of 2.69 times, 2.44 times, and 2.20 times, and dynamic PE of 25.8 times, 21.0 times, and 18.1 times.
Risk warning: capital market reform falls short of expectations; capital market fluctuates greatly; economic recovery falls short of expectations.