Introduction to this report:
The decline in the company's net investment revenue has put pressure on its performance; it is expected that supply-side reforms in the industry will accelerate, the efficiency of the company's capital use will be outstanding, the advantages of various business specialization will be continuously consolidated, and it is expected that it will achieve more than expected development through endogenous growth and epitaxial mergers and acquisitions.
Summary:
Maintain the “Overweight” rating and maintain the target price of HK$19.85, corresponding to 13.51xPe and 0.93xPb in 2024. The company's 2024Q1 revenue/net profit to mother was 38.74/1,239 million yuan, -37.61%/-45.13% YoY; the weighted average ROE was -1.29pct yoy to 1.21%, and the performance was lower than expected. Considering that supply-side reforms in the industry may be accelerated, the company's capital use efficiency is outstanding, and the advantages of various business specialization are continuously consolidated, and it is expected to achieve more than expected development through endogenous growth and epitaxial mergers and acquisitions. Maintain the company's profit forecast for 2024-2026 at 1.33/1.50 yuan/1.63 yuan, and maintain the target price of HK$19.85, corresponding to 13.51xPe and 0.93xPb in 2024, maintaining the “gain” rating.
The decline in net revenue from the company's investment business put pressure on performance, mainly due to the year-on-year decline in return on investment compounded by a contraction in the scale of OTC derivatives and other businesses under volatile market conditions. Net income from the company's investment business was -48.95% YoY to 1,847 billion yuan, accounting for -75.85% of the adjusted revenue (operating income - other business expenses) increase, putting pressure on performance; the main reason for the decline in investment business was that the return on investment was higher than the 2023Q1 high base of -0.51 pct to 0.55% year over year under volatile market conditions; in addition, the scale of OTC derivatives and other businesses contracted, and the scale of financial assets was -7.99% compared to 2023Q1.
It is expected that supply-side reforms in the industry will accelerate, the efficiency of the use of the company's capital will be outstanding, the specialization advantages of various businesses will be continuously consolidated, and it is expected that development will exceed expectations through endogenous growth and extrinsic mergers and acquisitions. Supply-side reforms in the industry are expected to accelerate. The State Council said it will concentrate its efforts on building a “national team” for the financial industry to promote the strengthening and excellence of large state-owned financial enterprises. The company's capital use efficiency is more advantageous than that of its peers. It continuously consolidates the advantages of various business specialization. The wealth management business continues to improve asset allocation and investment service capabilities, the investment banking business innovates fixed income products, and continuously improves merger and acquisition service capabilities.
It is expected to exceed expectations through endogenous growth and epitaxial mergers and acquisitions.
Catalyst: Supply-side reforms in the industry are advancing at an accelerated pace.
Risk warning: The equity market fluctuates greatly. Supply-side reforms in the industry have fallen short of expectations.