The investment banking business was under pressure. The high self-operating base in the first quarter led to a year-on-year decline in the company's operating income/net profit to mother of 67.3/1.72 billion yuan in 2023, +17.4%/+43.4% year-on-year, and a weighted average ROE of 5.39%, +1.22pct year over year. 2024Q1 operating revenue/net profit to mother was 1.48/370 million, year-on-year -24.0%/-38.6%, annualized ROE 4.48%. Investment banking business has been under pressure since the second half of 2023, and proprietary investment is the main influencing factor in performance. Considering the pressure on the company's investment banking business, we lowered the company's 2024-2025 net profit forecast to 18.2.1 billion yuan (previously 22/26), and added the 2026 forecast of 2.4 billion yuan, +6%/+15%/17% year over year, and EPS 0.5/0.6/0.7 yuan, respectively. The company's dividend payment rate in 2023 reached 30% (average of 11.3% in the past 5 years), and the emphasis on shareholder returns has increased. The company's investment banking brand advantage is strong. In the future, it will continue to firmly implement an investment-led strategy to strengthen business collaboration. The current stock price corresponds to 0.9/0.9/0.8 times the 2024-2026 PB, maintaining a “buy” rating.
Investment banking business was under pressure, brokerage market share increased, and the scale of consignment financial products bucked the trend (1) 2023/2024Q1 investment bank net revenue of 1.34/ 230 million yuan, -21%/-43% year-on-year. The 2023/2024Q1 IPO revenue was 59/40 million yuan, -40%/-43% year-on-year, and the market share of the IPO underwriting scale was 2.08%/1.77%.
The company's investment banking business projects and manpower reserves are relatively sufficient. As of April 24, 2024, the company had 32 total IPO reserves, ranking 6th in the industry and 299 sponsor representatives, ranking 9th among all sponsors.
(2) In 2023/2024Q1, the company's net brokerage revenue was 16.5/380 million yuan, -0.1%/-1.3% year-on-year. The company's share base market share in 2023 was 1.27%, +0.12pct year-on-year. In the 2023s, sales revenue was 190 million yuan, +2.1% year on year, and the scale of financial products sold on behalf of 425.8 billion yuan, +13% year over year, bucking the trend. (3) The 2023/2024Q1 asset management business reached 0.9/0.2 billion, -32.1%/-8.8% year-on-year.
Interest expenses increased due to the increase in the size of interest-paying debt. Q1 proprietary investment was affected by a high base and declined year-on-year (1) 2023/2024Q1 net interest income of the company was 1.21/270 million yuan, respectively, -13.5%/-12.5% year-on-year.
The market share of the dual-finance business reached 1.57%/1.53% in 2023/2024Q1, up from 1.32% at the end of 2022. The year-on-year decline in net interest income was mainly due to a significant increase in interest expenses due to a significant increase in the size of interest-paying debt, and +37% year-on-year in 2023. (2) In 2023, the company's self-operated investment income was 1.64 billion yuan, +644.5% year-on-year, the size of proprietary financial assets was +19.2%, and the return on proprietary investment was 4.7%, a significant improvement over 0.7% in 2022.
2024Q1's proprietary investment income was 430 million yuan, -40% year-on-year, with an annualized return on proprietary investment of 4.92%, and +3.1%/+2.1% for 2024Q1 Shanghai and Shenzhen 300/China Securities Composite Bonds respectively (+4.6%/+0.9% for 2023Q1, respectively).
Risk warning: Stock market fluctuations cause proprietary investment returns to fluctuate; investment banking business is uncertain due to policies.