CITIC's operating results in 2023 were slightly lower than expected
CITIC's 2023 revenue was +3% year-on-year to 680.8 billion yuan, and net profit to mother was -11% to $57.6 billion. If CITIC Securities were excluded, the company's operating profit/net profit to mother in 2023 were +10%/+5.4% year-on-year, respectively, slightly lower than our previous expectations, mainly due to the drag on the 4Q performance of the securities business and advanced intelligent manufacturing.
Development trends
Gather CITIC's comprehensive financial advantages and talents, and balance functionality and profitability to complete the five major chapters of finance. The company's consolidated financing1 external revenue in '23 was +0.5% YoY to 268 billion yuan (contributing 39%), and net profit to mother was +5% YoY to $50.5 billion (contributing 88%). 1) China CITIC Bank's revenue and net profit to mother in '23 were -3%/+8% year-on-year, respectively, to 2059/67 billion yuan. The company's risk resilience was consolidated and the quality and efficiency of service to the real economy continued to improve. 2) CITIC Securities' 23 revenue/net profit to mother was -3%/-8% year-on-year, respectively, to 837/19.7 billion yuan, maintaining its leading position in the industry. 3) CITIC Trust's revenue and net profit for 23 years were -23%/-13% year over year, respectively, to 50/2.6 billion yuan, and the business structure continued to be optimized. 4) CITIC Prudential's premium revenue in '23 was +1% year-on-year to $316 billion, with embedded value and total asset size +4%/+13%, respectively.
Accelerate industrial transformation and upgrading, and accelerate the cultivation of a second growth curve. The company's external revenue/net profit from the industrial sector was +4%/+5% year-on-year to 412.7/16.8 billion yuan, respectively: 1) The advanced intelligent manufacturing sector's external revenue/net profit to mother was -2%/+56% year-on-year to 504/83 billion yuan, respectively. The company continued to advance its global layout and continuously improve its product competitiveness. 2) The company successfully merged and acquired Tianjin Steel Pipe and Nangang Steel Group during the reporting period, and external revenue/net profit to mother increased 10%/-2% year-on-year to 267.5/12.7 billion yuan, respectively. 3) The external revenue/net profit of the new consumer sector was -3%/+94% year-on-year to 51.4/10 billion yuan, respectively. The potential of the digital communication/agricultural technology business was gradually unleashed, and the Dachangbanking/publishing business was affected to a certain extent by the weak market. 4) The new urbanization sector's external revenue/net profit attributable to mother was -13%/+17% year-on-year to 434/22 billion yuan, respectively. The year-on-year contraction in revenue was mainly due to the downward impact of the real estate industry.
The company has always attached great importance to shareholder returns and the dividend rate increased to 26%: the total dividend in 2023 was 0.515 yuan per share (interim dividend of 0.18 yuan per share, final dividend of 0.33 yuan per share), and the dividend rate was further raised to ~ 26% (average dividend rate for 2019-2022 ~ 25%), corresponding dividend rate of ~ 8% at the current price. We expect the company to maintain a steady dividend policy and continue to give back to shareholders in the future.
Profit forecasting and valuation
Due to adjustments to the growth assumptions of various business segments, the 24e net profit forecast was lowered by 19% to $61.96 billion, and the 25e forecast was introduced to $68.28 billion. The company currently trades at 0.3x/0.2x 24e/25e P/B. Considering the recent policy's sufficient appeal to market risk appetite or improvements and the company's dividend rate, the target price was maintained at HK$11.5 (0.40x/0.38x P/B) for the time being, maintaining an outperforming industry rating, with an upward margin of 53%.
risks
The quality of bank assets fluctuated greatly; capital markets fluctuated greatly; commodity prices fell sharply.