Description of the event
Societe Generale Securities released its three-quarter report for 2023. During the reporting period, it achieved total operating income of 8.856 billion yuan, up 22.6% year on year, attributable net profit of 1,581 billion yuan, down 11.2% year on year; weighted average return on net assets fell 1.1% pct to 3.0% year on year; and operating leverage after excluding client capital increased 15.93% to 3.56 times from the beginning of the year.
Incident comments
The company's brokerage business is under pressure, and all other businesses are growing. 1) By business line, brokerage, investment banking, asset management and interest achieved net income of 17.72, 7.78, 1.09 and 1,430 billion yuan respectively, compared to -18.3%, +4.7%, +0.5%, and +3.7% year-on-year. The company achieved net revenue of 838 million yuan, +1.43 billion yuan, mainly due to last year's low base effect; 2) Looking at the third quarter, the Shanghai and Shenzhen 300 Index fell 4.7%, the total price index of Chinese debt corporate bonds rose 1.7%, and the Wandequan A Index fell 4.3%. Against the backdrop of market turmoil, the company's Q3 self-operated business net revenue fell by 640 million yuan to -421 million yuan; 3) The average daily stock turnover for the first three quarters fell 12.8% year on year to 798.386 billion yuan; 3) The average daily stock turnover for the first three quarters fell 12.8% year on year to 798.386 billion yuan, and there was some pressure on the brokerage business in Q3.
Capital business revenue increased significantly over the same period last year, and the contribution of self-operated business increased mainly. 1) In terms of capital business, the company's capital income reached 2,268 billion yuan, +189.1% year-on-year; 2) Looking at self-operated business, the increase in the scale of corporate debt investment led to a 31.5% increase in financial assets at the end of the third quarter to 121,745 billion yuan. The self-operated investment business achieved significant growth. Among them, investment income and fair profit and loss reached -28 million yuan and 866 million yuan respectively. The main reason for the increase was the year-on-year increase in investment income from transactional financial instruments and fair value variable income.
The ranking of investment banks' stock and bond underwriting amounts continues to rise, providing fee-based businesses with a certain degree of profitability and resilience. 1) In the first three quarters, the company achieved fee-related business revenue of 2.66 billion yuan, down 11.93% year on year, of which investment banking business revenue was 778 million yuan, up 4.7% year on year; 2) Looking at the first three quarters, the company's equity underwriting scale was 148.823 billion yuan, up 25.17% year on year, and the overall underwriting ranking rose to 17 over the same period. 3) The underwriting scale of debt projects was 143.256 billion yuan, an increase of 39.37% over the same period, and the overall underwriting ranking increased to 17 over the same period. 4) In recent years, the company will continue to deepen its regional strategy, further strengthen core regional market competitiveness, and focus on next-generation information technology, new energy and other specialized fields.
The layout of public funds will continue to be promoted, and it is expected that the pension investment product line will continue to be built in the future. 1) As of the end of the first half of the year, the total asset management capital of XSE Asset Management was 87.73 billion yuan, up 17.5% from the beginning of the year. Based on the “two-round linkage” strategy, the company continues to enrich and improve the company's product line and explore the transformation and development path of asset management public funding; 2) In the first half of the year, when public funds were cold in the first half of the year, the average fund-raising scale of new public offering products of Xizheng Global Fund ranked among similar funds, and the Y share size of pension funds ranked among the top three in the industry, with a scale of 7.47 billion yuan. In the first half of 2023, Xingzheng Global Fund achieved net profit of 8.0 billion yuan, a year-on-year decrease of 13.5%, contributing 20.2% of net profit attributable to the Group.
We are optimistic about the company's growth under a two-wheel drive development strategy that actively exploits business synergies while accelerating wealth management and institutionalization processes. Net profit attributable to 2023-2024 is estimated to be 3,065 billion yuan and 4.803 billion yuan respectively, corresponding to PE 18.45 and 11.78 times, and corresponding PB to 1.02 and 0.94 times respectively, maintaining the buying rating.
Risk warning
1. A sharp correction in the equity market;
2. Tightening of regulatory policies.