Introduction to this report:

Affected by market fluctuations, the company's net investment income declined, putting pressure on performance. The company has outstanding service expertise, and is expected to better serve new quality productivity enterprises and benefit from policy opportunities.

Key points of investment:

Maintain the “overholding” rating and maintain the target price of 12.18 yuan/share, corresponding to 71.85xPe and 0.97xPb.

The company's 2024H1 revenue/net profit to mother was 8.865/0.953 billion yuan, or -47.76%/-75.11% year-on-year; the weighted average ROE was -1.71 pct to 0.58% year over year, falling short of expectations. Based on the company's operating conditions and market environment, the 24-26 profit forecast EPS was lowered by 0.17/0.21/0.24 yuan (0.33/0.41/0.45 yuan before adjustment). Along with the improvement in the service demand of enterprises related to new quality productivity, the company is expected to achieve improved performance, maintain a target price of 12.18 yuan, and maintain an “increase” rating.

Affected by market fluctuations, the company's net investment income declined, putting pressure on performance, and the year-on-year decline in investment banking business further dragged down performance. 1) Affected by market fluctuations such as US dollar interest rates, the valuation of the company's domestic and foreign financial assets declined, resulting in a year-on-year net income of -54.34% to 1.72 billion yuan from the investment business, contributing -46.97% of the adjusted revenue (operating income - other business expenses) increase, leading to a decline in performance. Among them, the return on investment was -0.79pct to 0.59% year over year, while the financial asset size was -4.59% to 283.741 billion yuan at the end of 2023. Affected by this, Haitong International Holdings' net profit was HK$2.873 billion, which dragged down the company's overall performance. 2) Affected by the distribution market environment, the investment banking business ranged from -56.17% to 0.854 billion yuan, accounting for -25.13% of the adjusted revenue increase, further hampering performance.

The company has outstanding service expertise, and is expected to better serve new quality productivity enterprises and benefit from policy opportunities. 1) In June 2024, Chairman Wu Qing stated at the Lujiazui Financial Forum that the capital market is required to actively embrace new quality productivity. By the end of June 2024, all companies had attended the Shanghai and Shenzhen North Exchange Listing Committee meetings, and the initial project applications for both the Shanghai and Shenzhen Exchanges had been accepted. With regard to the new quality of service productivity, the service demand of enterprises is expected to improve marginally.

2) The company has outstanding professional service capabilities, actively lays out science and technology innovation boards, grasps the “hard technology” position, and leads the private equity investment business scale and influence in the industry. At the same time, deepening the collaboration of “investment, finance, insurance, research” and wealth management business lines is expected to better serve new quality productivity enterprises and benefit from policy opportunities to “accelerate the construction of first-class investment banks”.

Catalyst: Marginal improvement in the distribution market.

Risk warning: The equity market fluctuates greatly; the US dollar interest rate cut falls short of expectations.