The focus is on wealth management and institutional business, and characteristic positioning forms business advantages. (1) Societe Generale Securities was founded in 1991 and listed on the Shanghai Stock Exchange in October 2010. The company promotes technological empowerment and builds two core systems of wealth management and large institutional business with customer needs as the center. It is a unique comprehensive brokerage firm in China. (2) Business rankings continue to improve. As of the end of September 2023, the company had total assets of 277.7 billion yuan, ranking 13th among listed securities companies, up 1 place from the end of 2022. 2023Q3 achieved revenue and net profit of 8.856 billion yuan and 1,581 billion yuan, with year-on-year growth rates of 22.64% and -11.20%, respectively; among them, the year-on-year growth rates of brokerage/investment banking/asset management/credit/self-employment were -18.26%/4.72%/0.55%/3.72%/217.74%, respectively.
Wealth management: “product+service” has achieved value growth, the development of securities asset management has been promoted, and fund investment and family offices have effectively achieved customer stratification. The company's wealth management continues to boost financial product sales and fund investment business, and customer holdings continue to increase. In November 2023, the Xizheng Asset Management Public Fund license was approved, and the public offering layout continued to advance. From 2019 to 2022, the company's wealth management index achieved a compound growth rate of 41.4% in revenue from consignment sales of financial products. The main reason is that since 2019, the company's wealth management transformation results have been outstanding, the customer base has been continuously consolidated, and the product consignment performance has been outstanding.
Institutional business: Building a sales ecosystem and allocating shares to drive the strength of China's capital brokerage business. By establishing a first-level sales transaction business headquarters, the company continues to build a sales ecosystem that directly faces institutional customers such as public funds, insurance, private placement, banks, etc. In 2022, the company's allotment of shares was implemented, driving the development of capital intermediation business.
Digital intelligence collaboration promotes digital transformation and layout, empowers wealth management, and deepens institutional business transformation. The company promotes digital transformation by deploying fintech products at three levels, including external customer service, internal management, and low-level digital intelligence infrastructure.
The securities industry has entered a new cycle of increased leverage and mergers and acquisitions integration, and the company's ROE center will effectively improve in line with the trend. Building a strong financial nation and strengthening the position of the capital market, improving the multi-level capital market, expanding and strengthening the capital market, and welcoming the migration of residents' wealth has become the consensus for the development of the industry. Using this as a strategic opportunity, Societe Generale Securities will focus on integrating asset management and other licensing resources to improve the efficiency of capital utilization.
Profit forecast and valuation: The company's net profit from 2023 to 2025 is expected to be 28.04/32.91/3.649 billion, with a year-on-year growth rate of 6.3%/17.4%/10.9%; EPS of 0.32/0.38/0.42 yuan; and PB of 1.0/0.9/0.9 times respectively. We use a relative valuation method. Considering Societe Generale Securities's characteristic positioning and development strategy, we gave the company a target price of 7.55-7.87 yuan/share for 2024. Currently, there is still room for growth of more than 26%. For the first time, we gave coverage a “Overweight” rating.
Risk warning: valuation risk; risk of large profit prediction bias; risk of large fluctuations in the secondary market; risk of changes in regulatory policies; risk of comprehensive deepening of basic system reforms in the capital market; risk of major fluctuations in investment returns, etc.