Layout of Jiangsu Ningxia, Nanjing state-owned assets actually holding. Nanjing Securities mainly distributes Jiangsu and Ningxia, in which the competitive advantage in Ningxia is more obvious, and a number of business indicators remain first in the industry. The actual control of the company is Nanjing State-owned assets Group, which has strong financial strength and business resources.
The credit of brokers is given priority to, and the listing has been strengthened in an all-round way. From 2015 to 2017, the average proportion of the company's brokerage credit business income was more than 54%. The investment banking and asset management business needed to be improved, and the self-management scale was on the low side. Nanjing Securities has a layout in the fields of futures, direct investment, stock exchange center and fund, and will enhance the strength of relevant subsidiaries after IPO.
The main contents are as follows: (1) brokerage business is the main business, with Jiangsu and Ningxia as the core. The company's operating income is mainly brokerage business, so it was greatly affected by the overall decline in stock-based trading volume (and the market share decreased from 0.62% to 0.56%) and the sharp decline in commission rate (from 5.1% to 3.2%) in 2015-2017. The company takes Jiangsu and Ningxia as the core, with the intensification of market competition, the commission rate in Ningxia is facing downward pressure; competition in Jiangsu is already sufficient, and there is little room for decline. After listing, the company will strengthen the service quality and increase the market share on the basis of stabilizing the commission rate.
(2) the contribution of credit transaction business is improved. From 2015 to 2017, the proportion of the company's net interest income was 8.7%, 21% and 32%, respectively, with an average growth rate of 32%. In the interest income, the two financial interest income is the main income, ranking in the top 40 of the market, with a comparative advantage; the scale of stock pledge repurchase business develops rapidly.
(3) there is still room for improvement in investment banking. In recent years, the income of the division of the company's investment banking business accounts for about 6%. The company has limited ability to underwrite equity financing, and the income mainly comes from bond underwriting and financial advisory business. After this fund-raising, the company is expected to strengthen the investment banking business team entity, optimize the incentive mechanism, and enhance the strength of the investment banking business.
(4) the self-supporting risk preference is low, and the fund-raising expands the investment. The proportion of revenue from the proprietary business segment of the company in 2015-2017 is generally lower than the industry average, because the risk appetite is low, and the proportion of net capital accounted for by equity and derivatives investment and collection investment is lower than the industry average. It is expected that after raising funds, the company will appropriately expand its own scale and bring incremental income.
(5) active management in the transformation of capital management. The company's asset management products are mainly oriented capital management, accounting for about 99% of the scale. Capital replenishment will support the company to carry out proactive management transformation and raise the overall rate level.
Listing to enhance capital strength. According to the prospectus, the company expects IPO to raise a net 940 million yuan, equivalent to 10% of its net assets in 2017, mainly to enhance the competitiveness of brokerage business, increase investment in capital intermediation and capital business, and promote the development of investment banking business. It is expected that the company's business structure will be more optimized after listing, at the same time, leverage can be used to further promote the expansion of debt financing and total assets, and break through the capital bottleneck.
Light asset operation, depreciation increases costs. From 2014 to 2017, the company's ROE was lower than the industry average, and the company adopted a light asset management strategy: the leverage ratio decreased from 4 times to 1.5 times, and there is more room for leverage improvement if there is a significant improvement in the market environment. In recent years, the company's income has declined while the depreciation of fixed assets has increased, resulting in an increase in the rate of operating expenses.
Investment advice: buy-An investment rating. We predict that the company's EPS from 2018 to 2020 will be 0.16, 0.17, 0.19 yuan, respectively, and the company's BVPS will be 3.95 in 2018. Combined with the current listed securities companies as a whole 1.5 times PB valuation and secondary IPO performance, give the company 2 times PB valuation, corresponding to the six-month target price of 7.9 yuan.
Risk hints: Securities market risk / operating risk / credit default risk