The strategic layout and organizational structure are on a par with the international first-class investment banks, and the "CICC" and "Sanhua one" strategies effectively enhance business cooperation. 1) China International Capital Corporation is the first Sino-foreign joint venture securities company in China. Since its establishment, it draws lessons from the "customer-centered" structure and concept of Morgan Stanley, an international first-class investment bank, and starts from institutional business. Institutional securities business is further subdivided into investment banking, stock trading and fixed income. In 21 years, investment banking, stock business and fixed income account for 21%, 28% and 11% respectively. 2) in the past 20 years, the company has put forward the strategy of "digitization, regionalization, internationalization" and "three modernizations and one family" to enhance business cooperation, while the company has promoted various departments to introduce business from top to bottom through the management committee. through joint customer service model, provide solutions in an innovative way.

Through capital replenishment and epitaxial growth to achieve considerable progress in performance, the business ranks high in the industry. Over the past 15 years, CICC has made many capital replenishment through H-share listing, H-share placement and A-share listing, respectively, with net profit rising from 1.82 billion in 16 years to 10.78 billion in 21 years, with a cagr of 42.7% in 5 years (vs. Industry + 9%); the year-on-year growth rate of homed net profit in 17-21 was 52%, 26%, 21%, 70% and 50% respectively; the company's net capital ranking rose from 21 in 16 to 11 in 21. In terms of extension expansion, China International Capital Corporation acquired CIC Securities in 17 years, supplemented local branches and personnel, expanded the retail business customer base of about 3 million, and consolidated the customer base for the transformation of wealth management. In 21 years, the company's total assets, revenue and net profit indicators are among the top 10 in the industry, financial leverage and ROE respectively ranked first and fourth in the industry, with strong profitability, wealth management business indicators such as institutional customer transaction volume and income from consignment of financial products ranked second and third in the industry; investment banking business indicators financial consultants, investment banking income and underwriting recommendation income ranked first, third and third, respectively.

CICC Wealth, as a subsidiary, carries out wealth management business independently, and its customer base continues to expand. 1) in 17 years, the company completed the acquisition of CIC Securities (later renamed CICC Fortune) to make up for the shortcomings of retail customers, and in 21, CICC transferred its domestic wealth management business to CICC Fortune. Transfer more than 20 business departments engaged in domestic wealth management business to CICC Wealth to deepen the transformation of wealth management. In 2017-21, the company's wealth management income increased from 3.437 billion to 7.538 billion, and cagr reached 2.69%. By the end of 21, the number of wealth management customers reached 4.535 million, an increase of 22.9% over the same period last year. Customer account assets reached 3 trillion yuan, an increase of 16.2% over the same period last year, including 34900 high net worth individual customers, an increase of 36.2% over the same period last year. The total assets of high net worth individual customer accounts reached 820.435 billion, an increase of 22%. 2) the company's fund investment continues to transform to buyers, building multi-level product configurations for different customer groups: launching "China 50" customized business for ultra-high net worth customers and "micro 50" low threshold configuration products for wealth customers; launch "Public offering 50" solutions for Volkswagen affluence and mass customers. According to the annual report, the company's wealth management buyer charged assets of nearly 80 billion at the end of 21, a sharp increase of more than 180% compared with the same period last year.

The stock business adheres to the transformation of "institutionalization, capitalization and internationalization", and the derivatives business takes the lead in the development. The company's stock business income increased from 2.29 billion to 8.489 billion from 2017 to 2021, and its cagr reached 38.76% in the past five years, accounting for 28% of the company's total revenue in 21 years. The company's stock business actively promotes "institutionalization". The customer coverage of QFII has exceeded 55% in 21 years, ranking first in the industry for 18 consecutive years. PB business remains strong, with A shares, H shares and public funds trading volume of 9 trillion / yoy+125%, 500 billion Hong Kong dollars / yoy+17% and 1.1 trillion / yoy+77% respectively. In terms of international business, the company has branches in seven major international financial centers, namely, Hong Kong, New York, Singapore, London, San Francisco, Frankfurt and Tokyo, laying the foundation for becoming a first-class international investment bank in China.

The company laid out derivatives business earlier and paid attention to non-directional equity investment. at the end of 21, the nominal principal of equity derivatives was 432.6 billion, an increase of 44% over the same period last year, and the size of tradable stocks was 127.7 billion, of which hedging positions accounted for nearly 85%. According to the latest data of the Securities Association (no longer disclosed since December 20), as of November 2020, the nominal principal of China International Capital Corporation's over-the-counter derivatives was 210.8 billion, with a market share of 15.8%, second only to CITIC. In the future, with the continuous expansion of China's over-the-counter derivatives market, CICC will continue to gain by virtue of its advantages in license, capital strength, institutional customer resources and so on.

Investment analysis opinion: the leading Chinese securities firm with a leading business model, has achieved remarkable results in the transformation of wealth management, highlighted the advantages of customer demand derivatives business, and was given a "overweight" rating for the first time, with 2022E target PB 2.8x. It is estimated that in the next 3 years, ROE 11.3%, 14.1%, 14.9% BPS 17.4, 19.5, 22.1 yuan. According to the PB valuation method, the target price of 2022E is 48.67 yuan, corresponding to the target PB of 2022E 2.8x, and the current upward space of the stock price is 11.7%.

Risk hint: the recovery of stock-based trading activity in the market is not as expected; the reform of the registration system is not as expected.