In 2023, Huatai Securities achieved operating income of 36.6 billion yuan, +14% year-on-year, and net profit to mother of 12.75 billion yuan, +15% year-on-year. The company's total assets were 905.5 billion yuan, +7% year on year, and net assets were 182.2 billion yuan, +9% year over year.
The annualized ROE was 8.12%, +0.63pct year on year, and the leverage ratio was 4.22 times, the same as previous years.
Overall overview: Leading net profit growth rate, strong proprietary asset management. In 2023, we achieved revenue of 36.6 billion yuan, +14% year over year; total revenue in Q4 was 9.3 billion yuan in a single quarter, +11% year over year and 6% month on month. Net profit to mother was 12.75 billion yuan, +15% year over year; Q4 net profit to mother was 3.2 billion yuan in a single quarter, -2% year over year, +4% month on month. At the end of 2023, total assets were 905.5 billion yuan, +7% YoY, and net assets were 182.2 billion yuan, +9% YoY. Annualized ROE 8.12%, +0.63 pct year over year. Operating leverage was 4.22 times, the same as in previous years. Self-employed/ brokering/ asset management/ other/ investment banking/ credit business accounted for 39%/20%/14%/13%/10%/3% of the main business, compared with 16/ -7/ 0/ 3/ -5/ -7 pct.
Fee business: The orderly transformation of asset management is taking advantage of the momentum, and brokerage investment banks are under significant pressure. (1) Market trading is lackluster, brokerage business is lackluster. In 2023, brokerage revenue was 5.96 billion yuan, -16% year over year; Q4 brokerage revenue in a single quarter was 1.3 billion yuan, -23% year over year, -9% month on month. Agency trading revenue was 6.4 billion yuan, -13% year on year; seat rental revenue was 700 million yuan, -14% year on year; revenue from consignment financial products was 600 million yuan, -33% year over year. Mainly due to the slump in the market, the scale of business has shrunk significantly. In 2023, the company's stock base turnover was 37 trillion yuan, -4% year over year, 15.5% market share, -0.17pct year on year; the average monthly activity of Changle Fortune Connect was 9.06 million yuan, -2% year on year. Sales volume of consignment financial products (excluding the cash management product “Tiantianfa”) was 443.5 billion yuan, -13% year over year. (2) Policies have been tightened and investment banks' revenue has plummeted, and they are facing challenges. Investment banking revenue in 2023 was 3 billion yuan, -25% year over year; Q4 single quarter revenue was 750 million yuan, -33% year over year, 10% month over month.
In 2023, the company completed an A-share IPO with an underwriting amount of 17.4 billion yuan, -46% year-on-year; the refinancing (additional issuance+allotment) scale was 38.4 billion yuan, -24% year-on-year. Shareholders' underwriting amounts rank fourth in the industry. Bonds underwrote 666.2 billion yuan, -24% year over year, maintaining the third highest ranking in the industry. (3) Active management transformation, ETFs are popular, and asset management business revenue has increased. Asset management revenue in 2023 was 4.3 billion yuan, +13% year over year; Q4 revenue in a single quarter was 1.1 billion yuan, -6% year over year, +4% month on month. The company's public fund management scale was 95.9 billion yuan, +3.2% year-on-year. ETFs are heating up significantly, boosting asset management revenue. At the end of '23, the net asset value of Huatai Berry's non-commodity fund was 284.9 billion yuan, +29% over the same period. The size of the Huatai Berry Shanghai and Shenzhen 300 ETF was 131 billion yuan, ranking first among non-commodity ETFs in the two markets.
Capital business: Self-employment continues to lead the way, and the quality of credit business assets has improved. (1) The bond market continued to rise, and the growth rate of proprietary business remained high. Proprietary revenue in 2023 was 11.7 billion yuan, +94% year over year; Q4 revenue in a single quarter was 4 billion yuan, 152% YoY and 115% YoY. Transactional financial assets amounted to 413.5 billion yuan, +18% year over year, including 195.8 billion yuan in bonds, +12% year over year. Non-directed investment increased slightly, generating $16.3 billion in derivative financial products, 3% over the same period last year. (2) Asset quality continued to improve, and net interest income declined due to declining repurchases and increased interest expenses. Net interest income in 2023 was $950 million, -64% YoY; Q4 revenue in a single quarter was $96 million, -83% YoY and -55% YoY. The financing capital was 112.3 billion yuan, with a market share of 6.8%, and a year-on-year share of +0.27pct. The scale of pledged repurchases declined, with the purchase and resale of financial assets of 12.5 billion yuan, -64% over the same period last year. Asset quality improved, and depreciation surged back 410 million yuan this year. Proprietary debt financing increases interest expenses and erodes interest income. Interest expenses in '23 were $13.7 billion, +23% YoY.
Investment advice: Maintain a “Highly Recommended” rating. The company has a forward-looking strategic layout. Relying on the advantages of long-term high level investment in technology, large scale and high quality customer base, the company is optimistic that the company's digital wealth management service level and customer demand-driven investment profitability will further improve, and continue to bring high performance. Looking ahead to the future market, the policy attitude to support the development of the capital market is firm. When the market ecology is improved, sentiment has clearly recovered, and the trend continues to improve, which is beneficial to the brokerage sector. We adjusted the company's net profit for 24/25/26 to 14.4 billion yuan/16.3 billion yuan/17.5 billion yuan, +13%/+7% year-on-year. Maintain the target price of 18.88 yuan, space of 37%, corresponding to 11.8 times PE in 2024, and maintain a highly recommended rating.
Risk warning: Policies are not as strong as expected, market fluctuations have intensified, and the company's market share has not increased as much as expected.