Affected by the market shock and the decline in the size of IPO in Hong Kong and US stocks, the performance is under short-term pressure. The net loss of 2022H1 is 150 million yuan, from profit to loss. The total income and net investment income are 510 million yuan,-79% of the same period last year. The sharp decline in IPO in the Hong Kong-US stock market led to a decline in the underwriting income of Huaxing Investment Bank, the net loss of Huaxing Securities in the first half of the year, and the position of stocks in the portfolio under the secondary market shock. Considering the current market environment and the company's performance, it is predicted that the EPS in 2022-24 will be 0.22 pound 1.17 RMB 1.63 yuan, and the estimated 2022BPS will be 13.70 yuan. The average PB of the comparable company in 2022 is 0.58 times, considering that China and the United States have reached an agreement on audit regulation, and the company's investment management is still expected to grow in the medium term, giving the company a target PB of 0.70 times in 2022, corresponding to a target price of HK $10.91. Maintain a "buy" rating.

Affected by the shock of the overseas secondary market, the income of the investment management division decreased by 86% compared with the same period last year. The company's investment management business 22H1 realized segment income and net investment income of RMB 190 million,-86% compared with the same period last year, accounting for 37% of the group's income, compared with the same period last year-16pct. Affected by severe shocks in the secondary market, the net investment loss of 22H1's own funds was 1.1 billion yuan (compared with a net income of 1.1 billion yuan in the same period last year), dragging down the performance. In addition, the company's 22H1 management fee income / realized carried interest income is 250 million yuan / 32.75 million yuan respectively, which is 694% compared with the same period last year. The increase in management fees is mainly related to the increase in subscribed capital after the first collection of Huaxing New economy USD IV Fund and Huaxing New economy RMB IV Fund.

Affected by the sharp decline in IPO in the Hong Kong and US stock markets, investment banking revenue fell 69 per cent compared with the same period last year. The company's investment banking business 22H1 achieved segment income and net investment income of 230 million yuan,-69 per cent year-on-year, accounting for 46 per cent of the group's income and + 16pct. The decrease in revenue is mainly due to the sharp decline in the size of initial public offerings in the new economy in the first half of 2022 compared with the same period in 2021, and the underwriting income of Huaxing-related investment banks has also declined. The underwriting income of the 22H1 investment bank division is 15.56 million yuan,-95% of the same period last year. In addition, the revenue of consultancy services in the first half of the year was 150 million yuan,-50% of the same period last year.

Huaxing Securities incurred a net loss; wealth management AUM reached 6.2 billion yuan 22H1 Huaxing Securities division total income and net investment income 37.74 million yuan,-89% year-on-year, accounting for 8% of group income, year-on-year-7pct. Huaxing Securities incurred a net operating loss of 110 million yuan in the first half of the year, mainly due to: first, it failed to achieve positive investment income, and the income from proprietary investment and previous Science and Technology Innovation Board IPO underwriting projects was negatively affected by fluctuations in the A stock market; second, the continuous input cost of innovative securities brokerage business; and third, the realization of investment banking income was slower than expected. By the end of 22H1, the asset management scale of wealth management reached 6.2 billion yuan, down from 9.4 billion yuan at the beginning of the year, mainly affected by the market, of which 5.4 billion yuan was for non-cash management, a limited decline compared with 6 billion yuan at the beginning of the year. In the future, Huaxing will develop its portfolio investment capacity to provide customized asset allocation solutions for ultra-high net worth customers.

Risk tips: policy restrictions, investment value fluctuations, fierce market competition.