Incident: 10/30, Guolian Securities disclosed its 2024 three-quarter report. The 3Q24 results slightly exceeded expectations. 9M24 achieved revenue of 2.01 billion yuan, -20% year-on-year, and net profit of 0.4 billion yuan, or -46% year-on-year; of these, 3Q24 net profit to mother was 0.31 billion yuan, +143% year-on-year. Flat month-on-month; 9M24 weighted ROE (unannualized) 2.18%, year-on-year -2.02pct.

9M24's main revenue outperformed the sector year over year, and showed that asset management revenue increased year over year, and net interest losses dragged down performance. 9M24 Guolian Securities's main revenue was 1.99 billion (excluding bulk commerce and other revenue) /yoy -18% (total revenue of 44 listed brokerage firms -5% YoY). By segment, brokerage, investment banks, and asset management achieved revenue of 0.4, 0.26, and 0.48 billion, respectively, +2%, -38%, and +65% year-on-year; net interest and net investment income (year-on-year growth rate) were -0.13 billion/ (9M23 profit 0.14 billion) and 0.93 billion, respectively /- 18% Looking at the revenue structure, investment accounts for 47%, asset management accounts for 24%, brokerage accounts for 20%, investment banks account for 13%, and net interest accounts for -6% (excluding other fees and long-term stock investment).

Improved investment income supported 3Q24's profit growth of 143% year-on-year: the equity market rebounded strongly at the end of September, and the 3Q24 bond market performed steadily. Under the 3Q24 high base, the company achieved investment income of 0.56 billion yuan/year over year +222% /month-on-month +6%, and the 3Q24 annualized return on investment of 5.35% (1H24 4.98%).

Transactional financial assets drive inventory expansion, and operating leverage is significantly higher than that of the industry. Asset side: Total assets of Guolian Securities at the end of 3Q24 were 102.9 billion yuan, +18% compared to the beginning of the year, +10%; total financial investment assets at the end of the period were 55.7 billion yuan, +8% compared to the beginning of the year and +6% month-on-month, of which transactional financial assets were +14% month-on-month and derivative financial assets -38% month-on-month. Debt side: Interest-bearing debt at the end of the period was 55.9 billion yuan, +24% month-on-month (mainly the expansion of sales and repurchases of financial assets). The test showed that 3Q24 annualized debt costs were 2.48%, compared with 2q24-0.14pct. Improved debt costs drove a month-on-quarter decline in interest expenses in 3Q24. Leverage: 4.89 times the operating leverage at the end of the period (3.84 times the operating leverage of 44 listed brokerage firms), +0.45 times compared to the beginning of the year, and +0.29 times the previous month.

The “League of Nations+People's Livelihood” integration has been accepted by the Shanghai Stock Exchange, focusing on follow-up processes and complementary effects at the business level. On August 8 of this year, Guolian Securities announced a restructuring draft; on September 3, Guolian Securities announced that it would issue shares to purchase 99.26% of Minsheng Securities and raise supporting capital, which was approved in principle by the Jiangsu State Assets Administration Commission; the next day, the Guolian Securities Shareholders' Meeting passed the relevant bill; on September 27, the Shanghai Stock Exchange accepted the merger and acquisition of Guolian Securities. 9M24 Minsheng Securities ranked 5th in the industry in terms of underwriting in its IPO business. It is concerned that the League of Nations and Minsheng have achieved a leapfrog increase in comprehensive strength and complementary advantages at the business level through business integration.

Investment analysis opinion: Raise profit forecasts and maintain buying ratings. The company's 3Q24 investment income performance was impressive, so assuming an increase in the return on investment, the company's 3Q24 debt cost assumption was lowered, thereby raising the profit forecast. We expect 2024-2026E net profit to be 7.3, 1.08, and 1.19 billion yuan (the original forecast was 0.65, 1.02, and 1.18 billion yuan), respectively, +9%, +47%, and +11% year-on-year, respectively. The current stock price corresponding to 24E is 1.43xPb.

Risk warning: The transaction between Guolian Securities and Minsheng Securities still needs to be reviewed and approved by the Shanghai Stock Exchange, and the securities, futures, fund shareholder qualifications and shareholder changes involved in this exchange have been approved by the relevant departments of the China Securities Regulatory Commission before it can be officially implemented. There is still uncertainty about whether it can be approved, registered, and approved.