Incident: Guolian Securities announced its 2024 quarterly report. 1Q24's profit loss to mother was 220 million/yoy -205.5%, and revenue was 170 million/yoy -74.4%. The weighted average ROE (non-annualized) was -1.23% /yoy-2.45pct.
Performance is expected to be pressured mainly due to losses in the equity derivatives business due to extreme market fluctuations. Revenue split: 1Q24 brokerage, investment banking, asset management, net interest, and net investment income were 1.1, 0.8, 1.4, -0.3, and -150 million yuan, respectively, compared with -3%, -13%, +350%, -149%, and -140%, respectively. Among them, the main reason for the high increase in asset management business was the League of Nations Fund. The company's equity derivatives business is at the top of the industry (in '21, the Association revealed that the OTC options business revenue ranked 10th in the industry, significantly higher than the company's current 30-40 overall ranking). It is expected that losses in the equity derivatives business will drag down profits under extreme market fluctuations.
Investment leverage continued to expand month-on-month, and yields were under significant pressure. Operating margin at the end of the period 4.70x/yoy+0.55x/qoq+0.35x, investment leverage (investment assets/ net assets) 3.15x/yoy+0.35x/qoq+0.26x, of which the financial investment scale was 56.5 billion yuan/yoy +16% /qoq +10%, and the investment leverage continued to expand year-on-month; affected by losses in the equity derivative business, the return on investment was significantly under pressure. It is estimated that 1Q24 single quarter annualized return on investment -1.1% /yoy-4.3pcqq/pc-1.9pc-pc-pc-pc-1.9pc-pc/pc-pc-1.9pc-pc-pc/qoq-pc-1.9pc/can be obtained t.
The integration with Minsheng Securities has begun, and we look forward to the results of the merger. The company announced on 4/25 that it is planning major asset restructuring matters and suspending trading. It has reached a restructuring agreement with 95.48% of Minsheng Securities shareholders. The integration plan is progressing step by step, and its comprehensive strength is expected to enter the top 20 in the industry. Judging from past brokerage merger cases, after the first suspension of trading, it is necessary to go through processes such as review by the board of directors, review by the shareholders' meeting, approval by the Securities Regulatory Commission, etc., and suspension of trading twice when the Securities Regulatory Commission reviews the merger and acquisition matters. The process takes a total of about 1 year.
Investment Analyst Opinion: Maintaining the “Highly Recommended” rating. The estimated net profit of Guolian Securities in 2024-2026E will be 610 million yuan, 890 million yuan, and 1.11 billion yuan, respectively, -9%, +45%, and +26% year-on-year (without mergers and acquisitions). The 4/29 closing price corresponds to the company's 24-26E dynamic PB of 1.65, 1.61, and 1.55 times, and dynamic PE of 49, 33, and 27 times, respectively.
Risk warning: The downward pressure on the economy is increasing; the activity of stock transactions in the market has declined sharply; the process of residents' capital entering the market has slowed down.