Event: Caitong Securities announced its 2024 semi-annual report. 1H24 achieved net profit of 0.93 billion/yoy -10.6% and revenue of 3.03 billion/yoy -12.9%, of which 2Q24 net profit 0.47 billion/yoy -13.2% /qoq +3.2%; 1H24 weighted ROE (non-annualized) 2.64% /yoy-0.45pct.

The performance is in line with expectations. Investment banking and investment business are under pressure, and asset management revenue is increasing. 1H24 Securities main revenue was 2.96 billion/yoy -12.0%. Looking at the main revenue split, 1H24's brokerage, investment banking, asset management, net interest, net investment, and long-term stock investment achieved revenue of 5.7, 2.3, 8.3, 0.25, 0.81, and 0.21 billion, respectively, -1.3%, -11.9%, +17.9%, -0.5%, -34.9%, and -20.8%, respectively. In terms of revenue share, 1H24's brokerage, investment banking, asset management, net interest, net investment, and long-term stock investment accounted for 19.3%, 9.5%, 27.9%, 8.6%, 27.3%, and 7.0%, respectively.

Operating and investment leverage has been steadily expanding, and the return on investment has declined under a high base. At the end of 1H24, the company's total assets were 141.3 billion/+5.6% compared to the beginning of the year, net assets were 35.3 billion/+1.9% compared to the beginning of the year, and operating leverage was 3.49x/+0.17x compared to the beginning of the year. In terms of investment business, the investment asset scale at the end of 1H24 was 77.6 billion/+11.5% compared to the beginning of the year, of which the investment scale of other debt was 13.1 billion/+88.1% compared to the beginning of the year; the company's investment leverage at the end of the period was 2.20x/+0.19x compared to the beginning of the year, which measured 1H24's return on investment of 2.20% /yoy-1.46pct.

The net revenue performance of the company's proxy purchases is significantly better than that of the industry, and it is expected that the share share of equity transactions will increase. In terms of brokerage business: 1H24 achieved net revenue of 0.49 billion/yoy -0.5%, outperforming the industry (average daily share base turnover yoy -7% in the 1H24 market, the commission rate is expected to continue to decline), and achieved 0.08 billion/yoy -6.0% revenue from the consignment business. In terms of wealth management layout: At the end of 1H24, the company's cumulative sales of financial products and product holdings were +8.5% and +18.9%, respectively. Total wealth product sales increased by nearly 78%. The transformation of the buyer's investment model progressed steadily, and the volume and quality of the fund investment business increased sharply. In terms of credit business: 1H24 achieved revenue of 0.5 billion/yoy -2.6% from the two-finance business, 17.1 billion/yoy -10.3% of capital raised at the end of the period, and the market share was 1.16/ the same as the previous year.

The performance of CaiTong Fund is clearly under pressure. The scale of CaiTong asset management has maintained a positive increase, and the total profit share of the major asset management business is 26pct. In terms of profit contribution, the total profit contribution of the major asset management line was 0.24 billion/yoy -4.9%, accounting for 26.2% /yoy+1.57pct. Specifically: 1) CaiTong Asset Management: 1H24 achieved revenue 0.85 billion/yoy +7.4%, net profit 0.22 billion/yoy +5.9%, contributing 24.0% to profit. 2) Caitong Fund (40% shareholding): 1H24 achieved revenue of 0.3 billion/yoy -21.6%, net profit 0.05 billion/yoy -54.9%, contributing 2.2% of profit. In terms of management scale, at the end of 1H24, Caitong Fund's public AUM reached 92.1 billion yuan/+9.4% compared to the beginning of the year, and the AUM of non-commodity funds reached 70.4 billion yuan/+11.3% compared to the beginning of the year; CaiTong Asset Management's total AUM (mainly fixed income + products) reached 286.3 billion yuan/+3.5% compared to the beginning of the year.

Investment Analyst Opinion: Maintaining the “Highly Recommended” rating. The net profit of CaiTong Securities in 2024-2026 is estimated to be 1.94 billion yuan, 2.17 billion yuan, and 2.43 billion yuan, respectively, -14%, +12% compared to the same period; the 8/28 closing price corresponds to the company's 24-26E dynamic PB of 0.83, 0.80, and 0.77 times, respectively.

Risk warning: The downward pressure on the economy has increased; the activity of market equity transactions has declined sharply; the process of entering the market of residents' capital has slowed down.