Incident: The company disclosed its 2023 annual report, achieving full year operating income of 60.1 billion yuan (YoY -7.74%), net profit to mother of 19.7 billion yuan (YoY -7.49%), weighted average ROE of 7.81% (YoY -0.86pct), and EPS of 1.30 yuan (YoY -8.45%). By business, the company achieved net revenue of 10.2 billion yuan, 6.3 billion yuan, 9.8 billion yuan, 4 billion yuan, and 21.8 billion yuan in 2023, respectively, -8%, -27%, -10%, -31%, and +24% compared with the same period last year.
Proxy purchasing revenue is under pressure along with the market, dragging down brokerage business performance. The company achieved net brokerage revenue of 10.2 billion yuan in 2023, -8% year-on-year. Among them, revenue from the brokerage securities business is -14% to 8.9 billion yuan, which is expected to be mainly affected by the decline in trading volume (-3% of the annual average daily share base transaction volume) and declining rates; revenue from the trading seat leasing and consignment financial products business was -2%, +1% to 1.5 billion yuan and 1.7 billion yuan respectively, all of which remained stable. By the end of 2023, the company's custodian clients' assets remained at the level of 10 trillion yuan, +4% compared to the same period; non-goods public funds held 19.2 billion yuan, ranking first in the industry.
The scale of brokers' asset management has declined, and asset management subsidiaries have officially set sail. The company achieved net revenue of 9.8 billion yuan from asset management business in 2023, -10% year-on-year. In terms of brokerage asset management, as of the end of 2023, the company's assets under management were 1.39 trillion yuan (YoY -18%), and annual management fee revenue was 2.1 billion yuan (YoY -29%); of these, the scale and revenue of the pooled asset management plan were -41% and -30%, respectively. Furthermore, CITIC Securities Asset Management officially opened in 2023. The multi-license business transitioned smoothly, and the exhibition business achieved a net profit of 73.65 million yuan in the first year. Focus on the subsequent public offering license application process. As of the end of 2023, Huaxia Fund had an asset management scale of 1.82 trillion yuan (YoY +6%) and achieved net profit of 2 billion yuan (YoY -7%) for the whole year.
The size of IPOs has been drastically reduced, and the leading position continues. The company achieved net investment banking revenue of 6.3 billion yuan in 2023, -27% year-on-year. On the domestic side, the company's IPO, refinancing, and debt bearing market share in 2023 all ranked first. The IPO size was 50 billion yuan (YoY -67%, mainly affected by the phased tightening of the IPO pace), with a market share of 14.03%; the refinancing scale was 227.9 billion yuan (YoY +1%), with a market share of 29.29%; the debt scale was 190 billion yuan (YoY +21%), with a market share of 6.85% (overall market size). Overseas, in 2023, the company completed 32 overseas equity projects worth US$1.8 billion, ranking second among Chinese brokerage firms in equity financing business in the Hong Kong market in China and GDR business in the European market.
Since the recovery in business performance has improved, there has been a marked decline in credit business. In 2023, the company achieved net revenue of 21.8 billion yuan, +24% year over year, mainly benefiting from the change in fair value income from -13.7 billion yuan in the same period last year to 3.6 billion yuan; in 2023, net income from credit business was 4 billion yuan, or -31% year over year, mainly due to interest expenses +16% year over year.
Investment advice: Maintain a Buy-A investment rating. Overall, market conditions and the regulatory environment affect the company's performance to a certain extent, but the company's leading position remains stable. In the context of the recent introduction of new “two strong, two strict” regulations, leading brokerage firms with leading compliance are expected to benefit even more and are optimistic about the company's long-term performance resilience. We expect the company's 2024-2026 EPS to be 1.46 yuan, 1.62 yuan, and 1.79 yuan, respectively, and will be given 1.25x2024 P/B, corresponding to a 6-month target price of 23.97 yuan.
Risk warning: macroeconomic downturn, large market fluctuations, stricter regulatory environment, etc.