Incident: On August 30, Guolian Securities announced its 2024 semi-annual report. 1H24 achieved operating income of 1.09 billion/yoy -39.9%; realized net profit of 0.09 billion/yoy -85.4%, of which 2Q24 profit was 0.31 billion/yoy -22.0% /qoq +240%; 1H24 weighted ROE (unannualized) 0.48% /yoy-3.0pct.

The investment business is clearly under pressure, and revenue from the brokerage and asset management business is increasing. 1H24's securities main revenue was 1.07 billion/yoy -40.2%. 1) Looking at the main revenue split: 1H24's brokerage, investment banking, asset management, net interest, and net investment income was 2.8, 1.7, 0.31, -0.09, and 0.37 billion yuan, respectively, +6.9%, -39.8%, +274%, -201%, and -61.1% compared with the same period last year; its China Union Fund also contributed to a high increase in asset management revenue.

2) Revenue share: 1H24 company brokerage, investment banking, asset management, net interest, and net investment income accounted for 26.0%, 15.7%, 29.1%, -8.3%, and 34.9%, respectively.

The scale of investment has increased slightly, and the return on investment is clearly under pressure. At the end of 1H24, the company's total assets were 93.3 billion/ +7.1% compared to the beginning of the year, net assets 18.3 billion/ +2.8% compared to the beginning of the year, operating leverage 4.61x/ +0.21x compared to the beginning of the year. In terms of investment business, the investment asset size at the end of 1H24 was 52.4 billion/ +1.8% compared to the beginning of the year, and the company's investment leverage at the end of the period was 2.87x/-0.03x compared to the beginning of the year; it was estimated that 1H24's return on investment was 1.44% /yoy-2.68pct, which is expected to be affected by the pressure on the equity derivatives business in a sluggish market environment.

The brokerage business outperformed the industry. Institutional commissions increased against the market, and the share of the two financing markets declined slightly. In terms of brokerage business, the company continues to shape a “general direction” wealth management brand and promote buyer perspective transformation, with cumulative customers reaching 1.856 million/ yoy +10.1%; 1H24 achieved net revenue of 0.26 billion/yoy +6.3%, which outperformed the industry (1H24 market average daily share base turnover yoy -7%), with institutional commission revenue of 0.07 billion/yoy+ achieved 0.02 billion/yoy+ 16.4% In terms of credit business, 1H24's two-finance business revenue was 0.27 billion/yoy -0.6%; 1H24 had an average daily balance of 9.43 billion/yoy -5.7%, with an average daily market share of 0.62%/yoy-2pct.

Under the influence of policy tightening, the scale of investment banking business is clearly under pressure. According to the statistics of the issuance date, 1H24 completed 1 IPO project, with an underwriting scale of 0.02 billion/yoy -98.9%, a market share of 0.05% /yoy-0.62pct, 1H24 corporate bonds underwriting scale of 28.62 billions/yoy -44.5%, and a market share of 0.47% /yoy-0.36pct. Currently, the company's equity business has 4 projects under review. In the second half of the year, the company will further expand its project reserves, focusing on the Beijing Stock Exchange IPO to enhance its business competitiveness.

The merger and restructuring with Minsheng Securities is progressing in an orderly manner, and comprehensive strength is expected to rise to the next level. We look forward to the effects of subsequent mergers and restructuring. On 24/8/8, the company announced the “Report on Issuance of Shares to Purchase Assets and Raise Supporting Funds and Related Transactions (Draft)”. It plans to acquire 99.26% of Minsheng Securities shares and raise supporting funds through issuing shares. The merger and restructuring is progressing smoothly. The transaction still requires review by the Guolian Securities Shareholders' Meeting, and review by the Securities Regulatory Commission and the Shanghai Stock Exchange. We believe that integrating the company's comprehensive strength through mergers and acquisitions is expected to advance. One is to form a synergy with Minsheng Securities' investment banking advantages and regional layout to enhance business competitiveness, and the other is to absorb and greatly enhance net capital and comprehensive strength after the merger, preparing for long-term development.

Investment analysis: The net profit of Guolian Securities in 2024-2026 is expected to be 0.48 billion yuan, 0.85 billion yuan, and 1.2 billion yuan, respectively, -29%, +77%, and +41% compared with the same period last year. The 8/30 closing price corresponds to 24-26E dynamic PB 1.53x, 1.50x, and 1.44x, 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.