CITIC Securities (600030) 2018 Annual Report Review: Leading Comprehensive Competitiveness Continues to Improve

CITIC Securities (600030) 2018 Annual Report Review: Leading Comprehensive Competitiveness Continues to Improve

[Event]CITIC Securities released its 2018 annual report and achieved operating income of 37.2 billion yuan, about -14%; net profit attributable to mothers was 9.4 billion yuan, which became -18%.

In the single quarter, Q4 revenue was Q3 + 39% MoM, and net profit attributable to mothers was + 19% MoM, a significant improvement.

Incremental income: Credit and asset management business income achieved a slight increase. The self-operated business was affected by adjustments in accounting policies and changes in fair value. Q2 has been negative due to market shocks so far, dragging down performance and the proportion of self-operated income decreased by 7To 24% of shares, still ranked first in each business.

Single quarter income quarter-on-quarter: Brokerage business quarter-quarter revenue quarter-on-quarter; investment banks benefit from refinancing efforts, revenue + 78% quarter-on-quarter; indexed net income quarter-on-quarter + 63%, mainly due to adjustments, other bond investment interest income is included in the current period (8.

500 million); self-operated investment income + 57% MoM, driving income + 6% MoM.

Cost structure: The operating cost ratio increased by 5 percentage points, mainly due to the provision for impairment losses on financial assets purchased under resale during the reporting period.

23 ppm, + 271% a year, of which 9 were added in the fourth quarter.

5.5 billion credit impairment losses, + 80% month-on-month; profits and operating profits in the reporting period were mainly due to regulatory documents received by the company, which caused the fact that the law involved was not established, 4.

36 billion expected debt reversals.

Leading investment bank, asset management competitiveness continues to increase.

In 2018, the industry’s CR10 total underwriting sales share increased to 71%, and business concentration continued to increase. The company’s shares and debt underwriting sales leaders, the IPO / refinancing / bond underwriting market share were 9 respectively.

2% / 15.

5% / 5.

11% every year -0.

2% / + 3% / + 0.

8%; the company’s asset management scale is 1.

34 trillion, of which 5528 ppm is actively managed, both ranking first in the industry, with a collective / directed / special scale of 17% / 20% / 30%, net asset management income less than -10%, holding Huaxia Fund, net income of fund businessYear + 9%.

Wealth management transformation and development, acquisitions further improve the layout.

In 2018, the company achieved a net income of 7.4 billion US dollars in brokerage business, a year-on-year increase of -8%, of which securities brokerage stock-based trading market share was 6.

09%, a year to raise 0.

4 single, institutions accounted for more than 50% of securities funds in agency trading, we believe that capital market transformation and reform will continue to advance, taking the science and technology board as an opportunity to guide the market institutional transformation, the company’s better institutional customer base, alternativeOpportunity; On December 24, 2018, the company issued an announcement intending to acquire 100% equity of Guangzhou Securities. As of March 4, the transaction report (expense) has been disclosed, replacing the Golden Eagle Fund, the value of Guangzhou Futures Assets, and the purchase consideration has been reduced to 1.

2 times PB. If the acquisition is successful, the company’s southern China layout will be further strengthened, and the wealth management business business outlets will be increased from 21 to 63, which is expected to transform into development and change in the Bay Area and enhance the company’s internal and external comprehensive strength.

The flexibility of self-operated investment has been enhanced, and the normalized development of derivatives business has helped ROE to improve.

In 2018, the company’s financial assets increased by at least 23%, and FVTPL accounted for 82%. The self-operated flexibility increased. In 2018, the income was negatively affected by the downturn in the equity market and the subsidiary’s Jinshi 西安耍耍网 Investment Profit. Under short-term pressure, 18Q4 has improved.The nominal principal of derivative financial assets is 1 trillion yuan, more than + 70%. The transformation of capital market reforms has deepened, and the demand for derivatives has gradually increased. The supervisory layer proposes to enrich the ETF varieties on the market and launch index spot issuance.Therefore, we are optimistic about the potential of medium and long-term derivatives business to enhance ROE.

The market share of Liangrong has continued to increase, the stock quality has shrunk, and the income is relatively stable.

In 2018, the company realized net interest income24.

22 trillion, ten years +0.

At 7%, the market share of the two financial markets increased by 3 to 7.

15%, ending balance exceeds -25%, stock quality balance exceeds -51%, income is under pressure but income is basically stable, and impairment provision accounts for 5% of financial assets under repurchase, which is sufficient.

Sales of overseas institutions increased against the trend: In 2018, CITIC CLSA completed a total of 31 IPOs worldwide, and its market share in Hong Kong increased by 4.

8% to 9.

3%, and actively explore the Japanese and Indian markets, investment bank revenue has improved significantly; in terms of institutional sales, under the pressure of the implementation of MiFID II, the company actively responded to the trend of European commission growth, up to 7% to 18%.

Investment suggestion: The company intends to implement employee shareholding, showing its confidence in the development of the industry and the company, and continues to be optimistic about the continued advancement of capital market reforms. As a leading securities firm, the company has comprehensively improved and its advantages have been consolidated.

We estimate that the net profit growth of the mother and father in 2019/2020 will be + 40% / + 25%, corresponding to EPS 1.

02/1.

27 yuan, BVPS 13.

82/15.

78 yuan. Risk Warning: The secondary market continues to be in a downturn, and financial supervision has changed more than expected.