Incident: CITIC Securities released its 2023 annual report, achieving operating income and net profit of 600.68 billion yuan and 19.721 billion yuan respectively, respectively, and -7.5% year-on-year, and weighted ROE -0.86 pct to 7.8% year over year; operating leverage after excluding customer capital was +7.1% to 4.27 times higher than at the beginning of the year.
The decline in market activity has put pressure on overall revenue, and asset quality has remained stable. On the revenue side, the company's brokerage, investment, asset management, interest, investment, and other revenue in 2023 were 102.23, 62.93, 98.49, 40.29, 224.87 billion yuan, and 7.187 billion yuan, respectively, -8.5%, -27.3%, -10.0%, -30.6%, +22.8%, and -29.7% year-on-year, respectively. The decline in market activity put pressure on overall revenue, but investment revenue rebounded on a low base; management expenses rose slightly year-on-year. 2.91 pct to 52.6%, credit impairment losses surged back 365 million yuan, and asset quality remained stable.
Revenue from the fee-related business was constrained by a decline in the market environment, but the leading position remained stable. 1) In the wealth management business, the net revenue of the company's purchasing, seat leasing, and consignment sales in 2023 was 59.39 billion yuan, 14.74 billion yuan, and 1,694 billion yuan, respectively, -16.7%, +14.4%, and +0.6% year-on-year. The decline in purchasing revenue is expected to result in a decline in rates, and the institutional stock brokerage business remains industry-leading. 2) Investment banks' equity business declined due to policy tightening, and the debt business grew well. In 2023, the company's IPOs, refinancing, and bond underwriting scales were 500, 2,279, and 1910 billion yuan, respectively -66.6%, +0.6%, and +21.0% year-on-year, with market shares of 14.0%, 29.3%, and 14.1% respectively, all ranking first in the industry. 3) The scale of asset management was constrained by the decline in the market environment. At the end of 2023, the company's asset management scale was -18.0% year-on-year to 1,388.5 billion yuan, but the share remained the highest in the industry.
Investment income rebounded year-on-year under a low base, and the scale of financial assets continued to expand. At the end of 2023, capital was raised, and the purchase and resale of financial assets was +11.0%, +97.6% to 118.7 billion yuan, driving credit business leverage +23.1% to 0.66 times; investment income rebounded at a low base, and the size of financial assets increased +19.1% to 715.7 billion yuan compared to the beginning of the year, driving investment business leverage +12.2% to 2.61 times the same.
Investment advice: Optimistic about CITIC Securities's competitive advantage in the industry with comprehensive leading business capabilities. The company is expected to achieve net profit of 213.34 billion yuan and 24.357 billion yuan in 2024-2025, respectively, +8.2% and +14.2% year-on-year respectively. The closing price on March 28 corresponds to PB 0.99 and 0.95 times, respectively, to maintain an “gain” rating.
Risk warning: risk of large fluctuations in the capital market; risk of a sharp decline in market transaction scale; risk of industry regulatory policies exceeding expectations and tightening