Incident: The company released its 2023 annual report, achieving total revenue of -11.33% to 1,113 billion yuan; net profit to mother -78.54% year-on-year to 73 million yuan; net assets to mother of 1,883 billion yuan, up 10.23% from the beginning of the year.
Key points of investment
Under the low capital boom, revenue from the financial information business declined under pressure. In 2023, capital market prosperity declined, and securities market transactions were sluggish (average daily turnover of A-shares was -5% compared to 2022 to 876.4 billion yuan), which had an impact on the company's sales of high-end products, resulting in financial information service revenue of -20% to 949 million yuan (accounting for 96% of total revenue, and the financial information service business is still a support point for the company's performance). Against the backdrop of insufficient overall prosperity in the securities market, the company continues to expand brand promotion and customer development efforts, and advertising and online promotion expenses have continued to grow (+6% to 286 million yuan over the same period) to ensure a stable scale of new users and long-term sustainable business development.
McGow Securities is expected to portray a second growth curve, and the acquisition of Pioneer Fund's “Securities+Fund” two-wing layout is in the beginning. The “five-year three-step” plan closed smoothly in the first year. The company promoted the resumption of business in an orderly manner, giving full play to the core competitive advantages and overall synergy effects such as resource integration and product development. The diversion results were remarkable (according to Yi Guan Qianfan, as of 2023/12, the compass app had monthly activity of about 1.5 million), and the net profit of McGo Securities turned operating losses into profits; in 2023/11, the company obtained 34% of Pioneer Economy's shares in a 100 million yuan auction, and we think the second growth curve is clear. 1) McGow Securities's 23Q4 performance turned against the wind, and brokerage business revenue expanded rapidly: in 2023, the company's net revenue from handling fees and commissions was +161% to $92 million, of which net revenue from brokerage business was +577% to 88 million yuan (accounting for more than 90% of handling fees and commission revenue), and rapid expansion drove the company's agents to trade securities +44% year over year to $2,410 billion. 2) The fixed income market developed steadily in 2023, and the proprietary business was resilient: The A-share equity market was turbulent throughout 2023. We expect the fixed income product allocation ratio in the company's self-operated holdings to be high, driving the company's investment income +599% to 88 million yuan in 2023.
Profit forecast and investment rating: The company's financial information service business is highly correlated with capital market sentiment, showing certain lagging characteristics (capital market sentiment changes first, business performance changes later), the company's financial information service revenue fluctuates in the short term, and the securities business is still in the growth stage of business collaboration (accounting for a lower share of total revenue); in summary, we basically maintain the company's profit forecast. It is estimated that in 2024-2026, the company's net profit to mother will be 1.41/1.85/226 million yuan, respectively (2024-2025) The previous year's value was 127/193 million), and the corresponding PE was 135/103/84, respectively. We maintain the company's rating of “increasing our holdings,” and are still looking forward to the development of McGow Securities and optimistic about the company's long-term growth.
Risk warning: The securities market is systemic, industry competition intensifies, and the recovery of securities business falls short of expectations.