Event: Zheshang Securities disclosed the third quarterly report of 2023, the performance is in line with KuaiBao, in line with expectations. The company's 9M23 realized revenue of 12.6 billion yuan / yoy+9%; homing net profit of 1.33 billion yuan / yoy+15%;3Q23 single-quarter revenue of 41.7 yuan / yoy+1%/qoq+18%, homing net profit of 420 million yuan / yoy-2%/ qoq-1%;9M23 weighted ROE (non-annual) 5.01%/yoy+0.36pct.

Investment banking and investment performance is eye-catching, and asset management has declined compared with the same period last year. 9M23 Zheshang Securities achieves 4.38 billion / yoy + 10% of the main securities income (excluding bulk trade, government subsidies, etc.). 1) split of main revenue: 9M23 brokerage, investment bank, asset management, net interest and net investment income achieve income / yoy growth rate of 1.32 billion /-9%, 680 million / + 30%, 260 million /-23%, 570 million / flat, 890 million / + 32%, and other fees (mainly futures economics and investment consulting) 660 million / + 55%. 2) in terms of performance composition, brokers accounted for 30.2%, net investment (including foreign exchange) accounted for 20.2%, investment banks accounted for 15.4%, other fees (mainly futures economics and investment consulting) accounted for 14.9%, net interest accounted for 13.0%, and asset management accounted for 5.9% (0.4% for long stock investment). Zheshang Securities and Futures Brokerage and research business has developed rapidly, which is reflected in the high increase in other fee income compared with the same period last year.

Total assets expanded steadily, operating leverage continued to rise, and financial investment assets shrank from the beginning of the year. At the end of 3Q23, the company's total assets were 147 billion yuan / + 7% at the beginning of the year, and the net assets were 26.6 billion yuan / + 2% at the beginning of the year. At the end of the period, the operating leverage was 4.82 times / + 0.38 times that at the beginning of the year. Previously, Zhejiang Merchants announced that they had participated in the auction of about 30.3% of Minsheng Securities (later acquired by Guolian Securities controlling shareholders), reflecting the company's determination to further improve the influence of securities business and the ability to integrate resources. In terms of investment business, the financial investment at the end of 3Q23 was 50.7 billion yuan / + 11% compared with the beginning of the year, of which 7.65 billion was invested in other bonds / + 832% at the beginning of the year, and 43.1 billion / 4% at the beginning of the year. (refer to 1H23, bonds account for 67% and stocks account for 13%). It is estimated that the annualized return on investment of 9M23 is 2.44% (the loss of 3 million of 3Q23's investment income leads to an annualized return of-0.02% in a single quarter).

IPO underwriting increased by more than 2 times compared with the same period last year, corporate bonds maintained the top 10 in the industry, and the advantage in the province was maintained. According to Wind data, according to the date of issue, in terms of equity financing business, 9M23 Zhejiang Securities IPO underwrites 2.98 billion yuan / yoy+244%, market share 0.9% (1H23 1.36%, the market share decline is mainly due to 3Q23 Zhejiang Merchants IPO underwriting 0 orders in a single quarter); 9M23 Zhejiang Securities refinancing underwriting scale 2.18 billion yuan / 9M22 refinancing underwriting 0 orders), market share 0.51%. In terms of bond underwriting, the size of 1Q23 debt is 117.8 billion yuan / yoy+81%, of which the corporate bond underwriting scale is 105.4 billion yuan / yoy+97%, market share of 3.5%, ranking seventh in the industry and maintaining the first place in Zhejiang Province. In terms of project reserve, there are 36 equity financing reserve projects (IPO 26 + refinancing 10) and 14 ongoing projects.

The management of the company has changed and look forward to the follow-up business development of the company. 10Accord30 Zhejiang Securities announcement nominated Qian Wenhai as a director of the company (previously worked in Zhejiang Exchange Group); Dong Mi (former) Zhang Hui was hired as vice president and chief risk officer; Assistant to the President (former) Deng Hongguang was hired as secretary to the board of directors (former director of Zhejiang Securities Research Institute). At present, the positions of Zhang Hui and Deng Hongguang have been reviewed by the board of directors, and Qian Wenhai's nomination of directors of the company needs to be considered by the shareholders' meeting. At this point, the corporate governance risk caused by the resignation of former president Wang Qingshan (former secretary Zhu Congjiu) has been basically cleared, and the follow-up business development of Zhejiang businessmen can be expected.

Investment analysis opinion: downgrade profit forecast and maintain buy rating. Considering the sluggish trading in the 9M23 equity market, the stock-based turnover assumption and the investment return assumption were lowered, thus lowering the 23E-25E profit forecast. The company's 23-25e net profit is expected to be 18.7,22.6 and 2.69 billion yuan (the original forecast is 20.8,26.2 and 3.18 billion yuan), which is + 13%, + 21% and + 19% compared with the same period last year. Taking into account the changes in the company's management, look forward to the company's subsequent business development and maintain the buy rating.

Risk hint: the downward pressure on the economy has increased; the activity of stock-based transactions in the market has dropped sharply. Zhejiang Merchants Research received a warning letter from Zhejiang Securities Regulatory Bureau in August because of the research report on violations.