On August 25, CICC released a research report and gave Futu a Outperform rating with a $86 price target.

CICC points out the following highlights:

• Futu 2Q23 total revenue +42% YoY to HKD2.48billion, exceeding CICC's estimate by 2%;

• Non-GAAP net profit +73% YoY to HKD1.19 billion, beating CICC's estimate by 4%;

• Futu announced a US$500 million repurchase program in March 2022, and by the end of June 2023, a total of US$360 million had been completed;

• Futu added 58,000 paid subscribers to 1.586 million in 2Q (vs. 41,000 in 1Q);

• Total client assets in Singapore were +20.5% QoQ and grew double-digit for the fourth consecutive quarter ，the average client asset size was +12.5% QoQ.

• Lower transaction volumes were partially offset by higher commission rates;

• Marketing expenses +24% QoQ, Cost per customer for net new subscriber growth decreased to HK$3,021;

• Futu has newly entered Japan and Malaysia markets, and plans to launch trading function in 4Q, CICC expects more overseas incremental customers to be contributed to the company.

Considering the new subscribers and interest income growth exceeding expectations, CICC raises 2023/24 earnings by 8.6%/9.6% to HK$5.0/5.8 billion. Maintain target price of US$86, corresponding to 18x 2023e P/E and 76% upside; maintain outperform rating.

Risks

Regulatory policy uncertainty;Low market turnover; Competition exceeds expectations; International expansion not as expected.