Incident: 8/29, CITIC Construction Investment disclosed its 2024 mid-year report. The results were in line with expectations. 1H24 achieved revenue of 9.53 billion yuan/yoy -29%; net profit to mother of 2.86 billion yuan/yoy -34%, weighted average ROE of 3.12% /yoy-2.29pct. 2Q24 net profit to mother 1.63 billion yuan/yoy -13% /qoq +33%.

Investment banking, asset management, credit, and proprietary business performance all improved month-on-month in the second quarter. Revenue by business line/yoy: brokerage 2.52 billion/ -10%, investment bank 1 billion/ -62%, asset management 0.64 billion/ +5%, net interest 0.38 billion/yoy -65%, investment 3.5 billion/yoy -18%. Revenue share: brokerage 31%, investment 44%, investment banking 12%, asset management 8%, net interest 5%. Q2 single-quarter results month-on-month: brokerage +1%, investment +33%, investment banking +24%, asset management +31%, credit +35%.

Investment bank underwriting levels have declined, and project reserves are relatively abundant. The IPO/refinancing/bond underwriting scale of 1H24 CITIC Construction Investment was 1.77/2.06/662.2 billion yuan respectively, with a market share of 5.8%/2.9%/10.8% (accounting for the total underwriting scale of securities companies), ranking 7th, 10th and 2nd respectively. In terms of reserve projects, as of August 28, 2024, the company had 124 IPO reserve projects, ranking second in the industry.

Wealth management continues to be customer-centered, improve service levels, and build a comprehensive customer service platform and business ecosystem with a full range of business types. The company's securities brokerage business had 0.735 million newly developed customers, an increase of 13.2% over the previous year, and the total number of cumulative customers exceeded 14 million; the scale of financial product holdings exceeded RMB 210 billion, and revenue from the buyer-specific business increased 24.5% year on year. The company continuously optimizes the customer experience of the mobile trading client “Dragonfly Point” app, which ranks 7th in the industry in terms of average monthly activity. The revenue of 1H24's securities agency business, transaction unit seat leasing, and consignment financial products business was 1.32/0.41/0.35 billion yuan, YOY -5.9%/-25.9%/-18.3%, respectively.

The institutional business continues to enrich the product line and serve institutional investors. In terms of stock trading business, the company aims for absolute profit, flexibly adjusts its position structure, and actively seeks market opportunities. The fully upgraded “CITIC Construction Investment China Multi-Asset Risk Parity Index 2.0 (CARP2)” and “CITIC Construction Investment World Class Asset Allocation Index 2.0 (WARP2)” were launched to provide financial institutions with a richer product line; in terms of fixed income business, continue to promote the construction of the FICC business system and comprehensively enhance professional capabilities. Steadily carry out self-operated investments, continuously enrich trading types and strategies, and expand the variety and scale of overseas investment; newly launched a “full circulation” foreign exchange settlement business for H shares, and the first batch of carbon quota repurchase transactions in the Shanghai carbon market.

The scale of fund management has increased rapidly, and the asset management business system continues to gain strength. Traditional assets focus on market customer needs, comprehensively lay out fixed income and “fixed income +” fields, provide comprehensive asset management services throughout the life cycle and all products, and continue to promote the establishment of asset management subsidiaries. At the end of the period, the company's asset management scale was 521.9 billion yuan, +11.2% compared to the end of the previous year; the scale of pooled asset management, single asset management, and special asset management was 143.5 billion yuan, 207.3 billion yuan, and 171.2 billion yuan respectively. The pooled/single asset management scale increased 19%/29% from the end of the previous year. In terms of public fund business, CITIC Construction Investment Fund continues to make efforts to lay out public fund business, optimize product structure, and improve product quality. At the end of the period, CITIC Construction Investment Fund's asset management scale was RMB 113.7 billion, up 21.3% from the end of 2023. Among them, the management scale of public funds was RMB 81.5 billion, an increase of 19.6% over the end of 2023.

Investment analysis opinion: Lower profit forecasts and maintain buying ratings. Considering that the company's 1H24 performance was mainly dragged down by investment income, we lowered the company's return on investment assumptions, thereby lowering profit forecasts. CITIC Construction Investment 24-26E is expected to achieve net profit of 5.7, 6.3, and 6.8 billion yuan (originally forecast 6.2, 7, 7.7 billion yuan), or -18%, +9% year-on-year, respectively. Considering the clear reversal of the company's Q2 performance, the wealth and asset management system has been very effective, and the institutional business service content continues to be rich, maintaining CITIC Construction Investment's “buy” rating.

Risk warning: Capital market reforms fell short of expectations, and the effect of boosting liquidity in the A-share market fell short of expectations; the market fell sharply, and the growth in the size of the fund was weak; the Shenzhen Stock Exchange adopted self-regulatory measures with written warning against CITIC Construction Investment Securities on January 3, 2024; the Shandong Securities Regulatory Bureau adopted administrative supervision measures to issue a warning letter against CITIC Construction Investment Securities on January 24, 2024; the Guangdong Securities Regulatory Bureau adopted administrative supervision measures to issue a warning letter against CITIC Construction Investment Securities on April 24, 2024; the Beijing Securities Regulatory Bureau adopted administrative supervision measures for CITIC Construction Investment Securities on April 24, 2024; April On the 30th, administrative supervision measures were taken against CITIC Construction Investment Securities ordering an increase in the number of compliance checks.