Guolian Securities announced its 2024 mid-year report. In the first half of 2024, the company achieved revenue of 1.086 billion yuan, a year-on-year net profit of 0.088 billion yuan, a year-on-year net profit of -85.39%, a weighted average ROE of 0.48% and -3.00 pct year on year. 2024Q2 achieved revenue of 0.912 billion yuan, -19.16% YoY, +426.15% month-on-month, net profit of 0.306 billion yuan to mother, -22.01% YoY, and reversal of losses month-on-month. Segment revenue growth rate: brokerage +6.88%, investment banking -39.85%, asset management +273.81%, net interest income -201.16%, investment -60.98%, others -70.54%, segment revenue share: brokerage 25.73%, investment banking 15.88%, asset management 28.77%, net interest income -8.20%, investment 34.57%, others 3.55%.

Improve the account management system with fund investment as the core, and promote the transformation of buyers' wealth management. The company was one of the first brokerage firms to obtain a fund investment license. By the end of the first half of 2024, the total number of the company's fund investment customers was 0.3194 million, +13.35% over the same period last year. The authorized account asset size was 6.958 billion yuan, which was basically the same as the previous year, and a total of 30 cooperation channels were launched. In terms of wealth management business, the customer base continued to strengthen. In the first half of the year, 0.1194 million new customers were added, with a cumulative total of 1.8558 million customers, an increase of 10.06% over the previous year.

Issuing shares to acquire Minsheng Securities may welcome a significant increase in overall strength. On August 9, the company announced a draft to issue shares to purchase 99.26% of Minsheng Securities. The transaction consideration was 29.492 billion yuan, which was approximately 1.84x the consolidated net assets of Minsheng Securities. At the same time, the company raised 2 billion yuan in supporting capital for Minsheng Securities to increase capital and develop its wealth management business and information technology infrastructure. Based on 2023 data, after merging Minsheng Securities, the company's total assets are +84.05%, net assets +160.76%, revenue +127.10%, and net profit to mother +89.78%, and the overall strength of the company will increase significantly.

Investment in bonds increased, while investment in stocks and funds contracted. As of the end of the first half of the year, among the company's transactional financial assets, the size of bonds was +8.3%, the size of stocks was -47.6%, the size of public funds was -48.7%, and the size of private equity funds was -65.4%. 2024Q2 achieved a net investment income of 0.525 billion yuan, which clearly reversed the 2024Q1 loss trend and was the main reason for the rebound in the company's Q2 performance.

Risk warning: Stock market sentiment declines, investment business development falls short of expectations, collaboration with Minsheng Securities falls short of expectations after merger, policy risks, etc.

Investment advice: Based on the company's interim report data, we lowered the growth rate of the company's brokerage business, investment banking business and investment business, and lowered the 2024-26 net profit to 0.475 billion yuan, 0.827 billion yuan, and 0.937 billion yuan based on this, by 45.8%, 18.1%, and 14.0%, respectively. Among them, the decline was significant in 2024, mainly due to the fact that the growth rate of the investment business declined a lot. Considering that the company had an early layout in buyers' wealth management fields such as fund investment, its comprehensive strength increased dramatically after the merger with Minsheng Securities, and the steady share of bond assets in financial investment assets increased, we are optimistic that the market share of the company's major businesses will increase in the future. We maintain the company's “better than market” rating.