Core Viewpoint Futu Holdings Limited reported its first quarter 2024 financial results, highlighting significant growth in client numbers and trading volumes, despite a decline in net income and gross profit compared to the previous year. Operational Highlights - The total number of paying clients increased by 23.5% year-over-year to 1,887,270 as of March 31, 2024 [2] - Registered clients rose by 15.4% year-over-year to 3,812,326 [2] - Total users grew by 12.3% year-over-year to 22.5 million [2] - Client assets increased by 11.2% year-over-year to HK$517.9 billion [2] - Daily average client assets were HK$480.0 billion, up 6.0% from the same period in 2023 [2] - Total trading volume for the first quarter was HK$1.3 trillion, a 9.5% increase year-over-year [2] Financial Highlights - Total revenues rose by 3.7% year-over-year to HK$2,592.5 million (US$331.3 million) [3] - Gross profit decreased by 3.9% year-over-year to HK$2,122.2 million (US$271.2 million) [3] - Net income fell by 13.1% year-over-year to HK$1,035.1 million (US$132.3 million) [3] - Non-GAAP adjusted net income decreased by 11.6% year-over-year to HK$1,121.1 million (US$143.3 million) [3] Management Commentary - The CEO noted a 330.8% year-over-year increase in new paying clients, totaling 177,000, which is over 50% of the full-year guidance [4] - Strong growth was observed in new markets, particularly Malaysia, where over 100,000 registered clients were attracted within six weeks of launch [4] - Despite market depreciation affecting client holdings, there was strong net asset inflow across all markets, especially in March [4] - Total trading volume increased by 40.0% quarter-over-quarter to HK$1.3 trillion, driven by heightened client interest in technology and high-dividend stocks [4] Wealth Management and Client Services - Total client assets in wealth management reached HK$64.0 billion, up 72.8% year-over-year [5] - The company had 430 IPO distribution and investor relations clients, a 21.8% increase year-over-year [5] Revenue Breakdown - Brokerage commission and handling charge income was HK$1,082.1 million, a slight increase of 0.3% from the previous year [6] - Interest income rose by 4.6% to HK$1,354.2 million, driven by higher margin financing income [6] - Other income increased by 23.7% to HK$156.2 million, primarily due to higher fund distribution service income [6] Cost Structure - Total costs increased by 61.7% year-over-year to HK$470.2 million [7] - Interest expenses surged by 139.1% to HK$312.8 million, mainly due to higher costs associated with securities borrowing and lending [7] - Selling and marketing expenses rose by 107.1% to HK$292.7 million, reflecting the increase in new paying clients [9] Profitability Metrics - Income from operations decreased by 15.1% to HK$1,192.7 million, with an operating margin decline to 46.0% [11] - Net income margin fell to 39.9% from 47.7% in the previous year [12] - Basic net income per ADS was HK$7.53, down from HK$8.54 in the first quarter of 2023 [13]

Core Viewpoint - Futu Holdings Limited Sponsored ADR (FUTU) is currently viewed as a better value investment compared to Cellebrite DI Ltd. (CLBT) based on various valuation metrics [1][3]. Group 1: Company Overview - Both FUTU and CLBT hold a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions and an improving earnings outlook for both companies [2]. - Value investors are interested in multiple valuation metrics to determine if a company is undervalued at its current share price levels [2]. Group 2: Valuation Metrics - FUTU has a forward P/E ratio of 17.41, while CLBT has a significantly higher forward P/E of 37.23 [3]. - The PEG ratio for FUTU is 1.25, indicating a more favorable valuation in relation to its expected earnings growth compared to CLBT's PEG ratio of 2.07 [3]. - FUTU's P/B ratio stands at 3.76, contrasting sharply with CLBT's P/B ratio of 64.97, further supporting FUTU's position as a more attractive value option [3]. - Based on these valuation figures, FUTU earns a Value grade of B, while CLBT receives a Value grade of C [3].

Core Viewpoint - Futu Holdings Limited is set to announce its financial results for Q1 2024 on May 28, 2024, before U.S. markets open, indicating a focus on transparency and communication with investors [1]. Group 1: Financial Results Announcement - The financial results for the first quarter ended March 31, 2024, will be reported before U.S. markets open on May 28, 2024 [1]. - An earnings conference call is scheduled for May 28, 2024, at 7:30 AM U.S. Eastern Time, allowing stakeholders to engage directly with management [1]. - Participants must pre-register for the conference call to receive access information [2]. Group 2: Company Overview - Futu Holdings Limited operates as a tech-driven online brokerage and wealth management platform, utilizing advanced technology to enhance the investing experience [3]. - The company offers a comprehensive range of investment services through its digital platforms, including trade execution, margin financing, and wealth management [3]. - Futu integrates social media tools within its platforms to foster connectivity among users, investors, and key opinion leaders [3].

Core Viewpoint - Futu Holdings Limited is set to report its financial results for Q1 2024 on May 28, 2024, before U.S. markets open, indicating a focus on transparency and communication with investors [1]. Group 1: Financial Reporting - The financial results for the first quarter ended March 31, 2024, will be announced before U.S. markets open on May 28, 2024 [1]. - An earnings conference call is scheduled for May 28, 2024, at 7:30 AM U.S. Eastern Time, allowing stakeholders to engage directly with management [1]. - Participants must pre-register for the conference call to receive access information, highlighting the company's organized approach to investor relations [2]. Group 2: Company Overview - Futu Holdings Limited operates as a tech-driven online brokerage and wealth management platform, emphasizing a fully digitalized financial service experience [3]. - The company offers a comprehensive range of investment services, including trade execution, margin financing, and wealth management through its platforms, Futubull and moomoo [3]. - Futu integrates social media tools within its services to enhance user connectivity and engagement with various stakeholders, including investors and analysts [3].

Core Insights - Futu Holdings Limited's moomoo app has achieved one million downloads in Japan since its launch in September 2023 [1] - The app began offering U.S. stock trading in September 2023 and Japanese stock trading in March 2024 [1] - Futu's subsidiary, Moomoo Securities Japan Co., Ltd., holds a Financial Instruments Business Operators (FIBO) license and is a member of key financial associations in Japan [1] Company Overview - Futu Holdings Limited is a technology company that provides fully digitalized financial services through its platforms, Futubull and moomoo [2] - The company offers a comprehensive range of investment services, including trade execution, margin financing, and wealth management [2] - Futu integrates social media tools to enhance user connectivity and engagement within its investment ecosystem [2]

Core Viewpoint - Futu Holdings Limited has filed its annual report for the fiscal year ended December 31, 2023, with the SEC, highlighting its commitment to transparency and providing access to financial information for shareholders [1]. Company Overview - Futu Holdings Limited (NASDAQ:FUTU) is a technology-driven company that enhances the investing experience through fully digitalized financial services [2]. - The company operates proprietary digital platforms, Futubull and moomoo, offering a comprehensive range of investment services, including trade execution, margin financing, and wealth management [2]. - Futu integrates social media tools within its platforms to foster a user-centric network, connecting users with investors, companies, analysts, and media [2]. - Additionally, the company provides corporate services such as IPO distribution, investor relations, and ESOP solutions [2].

Revenue and Financial Performance - Revenue from margin financing and securities lending businesses was HK$2,118.0 million, HK$2,088.3 million, and HK$2,807.4 million (US$359.4 million) in 2021, 2022, and 2023, representing 29.8%, 27.4%, and 28.1% of total revenue, respectively[92] - Interest income from bank deposits increased significantly from HK$197.4 million in 2021 to HK$2,482.9 million (US$317.9 million) in 2023, representing 2.8%, 13.0%, and 24.8% of total revenue in the respective years[92] - Total revenues increased from HK$7,115.3 million in 2021 to HK$10,008.4 million (US$1,281.3 million) in 2023[234] - Net income grew from HK$2,810.2 million in 2021 to HK$4,278.9 million (US$547.8 million) in 2023[234] - Futu Securities generated revenues of HK$7,749.1 million (US$992.1 million) in 2023, accounting for 77.4% of the company's total revenues[227] - The assets of Futu Securities amounted to HK$77.5 billion (US$9.9 billion) at the end of 2023, representing 79.8% of the company's total assets[227] - Futu Network and the Consolidated Affiliated Entities generated revenues of HK$31.7 million (US$4.0 million) in 2023, accounting for 0.3% of total revenues[227] - The total assets of Futu Network and the Consolidated Affiliated Entities amounted to HK$687.1 million (US$87.9 million) at the end of 2023, representing 0.7% of total assets[227] Loans and Advances - Outstanding loans and advances grew from HK$29.6 billion in 2021 to HK$32.5 billion (US$4.2 billion) in 2023, with an allowance for credit losses of HK$45.9 million (US$5.9 million) recorded as of December 31, 2023[94] - Receivables balance remained stable at HK$10.4 billion, HK$9.8 billion, and HK$10.1 billion (US$1.3 billion) in 2021, 2022, and 2023, respectively[94] Wealth Management and Product Distribution - Wealth management products distributed by the company involve risks such as default, interest, liquidity, market, counterparty, and fraud risks, which could negatively impact reputation and financial conditions[97] - Wealth management product distribution services generated client asset balances of HK$57.6 billion (US$7.4 billion) as of December 31, 2023, with 416,229 clients holding wealth management products[256] - The company partnered with 82 asset management companies and offered 169 fund products on Futubull and 135 fund products on moomoo in Singapore as of December 31, 2023[256] Technology and Infrastructure - The company relies on proprietary technology, and failure to maintain technological superiority or adapt to changing client demands could adversely affect results[99] - The company's information technology systems are vulnerable to disruptions from cyberattacks, natural disasters, and other events, which could harm business operations[101] - The company's internet-based business depends on the reliability of internet infrastructure, and any failure could significantly impact user and client retention[101] - Third-party software and infrastructure failures have caused disruptions, including system shutdowns and delayed trade executions, impacting user satisfaction and transaction volumes[103] - Increased traffic on online and mobile platforms could strain system capacity, leading to slower response times or failures, potentially harming the company's brand and reputation[103] - Dependence on third-party service providers for critical infrastructure and software poses risks, including potential disruptions, increased costs, and adverse effects on business operations[104] - External service providers supply key market data and technology, and any disruptions or inaccuracies in their services could harm the company's operations and reputation[106] - The company's distributed, cloud-based infrastructure ensures high stability and scalability, with modular architecture allowing for independent upgrades[292] - The company employs a multi-level protection mechanism, including data encryption and two-factor authentication, to secure client data and trading information[292] Regulatory and Compliance Risks - Regulatory scrutiny in the securities brokerage and wealth management industries, particularly in the U.S., could lead to new rules or requirements, impacting the company's business model and operations[114] - The company faces risks from evolving PRC laws and regulations, including potential violations due to changes in interpretation or enforcement, and the need for additional licenses or approvals[110] - Policy changes on investable assets could significantly reduce the company's addressable market, potentially slowing growth and impacting trading volume[117] - The company is subject to US Brokerage Regulations, Singapore Brokerage Regulations, and regulation by the Australian Securities and Investments Commission due to its expansion into these markets[139] - The company may face delisting from U.S. exchanges if the PCAOB is unable to inspect its auditor for two consecutive years under the HFCAA[179] - The company is required to comply with PRC regulations on internet content, including reporting suspicious content and undergoing security inspections, with non-compliance risking business shutdown[130] - The company has implemented internal control procedures to screen platform content, but there is no assurance of full compliance with PRC regulations at all times[130] - The company is subject to litigation, regulatory investigations, and potential penalties, which could harm its reputation and financial condition[132] - The company's risk management policies may not fully mitigate risks in volatile markets, potentially leading to significant losses[132] - The company may pursue strategic investments, acquisitions, or alliances, which could disrupt its business and adversely affect financial results[134] - Labor costs are expected to increase due to inflation and stricter labor laws, potentially impacting the company's financial condition[134] - The company has concluded that its internal control over financial reporting was effective as of December 31, 2023, but failure to maintain this could harm investor confidence[134] - The company faces increasing regulatory and investor focus on ESG matters, which could impose additional costs and risks[136] - The company may be subject to fines or sanctions if its activities are deemed to violate the Anti-Monopoly Guidelines for Internet Platforms, with fines up to 10% of last year's sales revenue[158] - PRC regulations on foreign exchange, including SAFE Circular 37, may restrict the company's ability to distribute profits or increase registered capital for its PRC subsidiaries[159][161] - The company faces uncertainties regarding the enforcement of new PRC laws and regulations, which could impact its business operations and financial condition[154][158] - The company may be subject to more stringent foreign exchange review and approval processes, potentially affecting its ability to remit dividends or conduct cross-border transactions[161] - PRC resident employees participating in overseas stock incentive plans must register with SAFE and remit foreign exchange income into a PRC collective foreign currency account[163] - Loans to PRC subsidiaries by offshore holding companies are subject to SAFE registration and cannot exceed statutory limits[165] - The company may be treated as a PRC resident enterprise and subject to 25% global income tax if deemed to have a "de facto management body" in China[167] - Non-resident enterprise shareholders may face a 10% PRC withholding tax on dividends and gains from ADS or Class A ordinary shares if the company is deemed a PRC resident enterprise[169] - Indirect transfers of equity interests in PRC resident enterprises may be subject to PRC enterprise income tax at a rate of 10% under SAT Public Notice 7[171] - Renminbi conversion for capital account transactions is restricted and requires SAFE approval, limiting the company's ability to utilize RMB cash flow outside China[172] - China's M&A regulations make it more time-consuming and complex for foreign investors to acquire PRC companies, potentially delaying or inhibiting the company's ability to complete such transactions[174] - Shenzhen Futu enjoys a 15% preferential enterprise income tax rate until 2026 due to its status as a "High New Technology Enterprise"[174] - Futu Network Technology (Shenzhen) Co., Ltd. is entitled to a 15% preferential income tax rate until 2025 as a "High New Technology Enterprise"[174] - The discontinuation of preferential tax treatments or government subsidies could adversely affect the company's financial condition and results of operations[174] - Dividends paid by PRC subsidiaries to the Hong Kong subsidiary may be subject to a reduced withholding tax rate of 5% under the tax treaty between Mainland China and Hong Kong[177] - The PCAOB's inability to inspect the company's auditor in China historically deprived investors of the benefits of such inspections[177] - Overseas authorities face significant challenges in conducting investigations or collecting evidence within China due to legal and regulatory restrictions[181] - The company relies on contractual arrangements with VIEs in China, which accounted for 0.2% of total revenues and 0.1% of total assets in 2023[182] - The contractual arrangements with VIEs may not be as effective as direct ownership and could expose the company to legal and operational risks[182] - The PRC government regulates internet-based businesses with foreign ownership limited to 50% for certain value-added telecommunication services, excluding e-commerce and other specified services[184] - Futu Holdings conducts operations in China through Contractual Arrangements with Consolidated Affiliated Entities, considered the primary beneficiary under U.S. GAAP[184] - Potential penalties for non-compliance with PRC regulations include revoking business licenses, levying fines, confiscating income, and restricting operations[186] - New PRC laws may impose additional requirements on the company's corporate structure and Contractual Arrangements, potentially affecting business operations[187] - The company relies on dividends from PRC subsidiaries, which are subject to statutory reserves of at least 10% of after-tax profits until reaching 50% of registered capital[192] - Transfer pricing adjustments by PRC tax authorities could increase tax liabilities and limit preferential tax treatments for the VIEs[195] - Misuse or misappropriation of corporate chops and seals by authorized personnel could disrupt operations and require significant legal action to resolve[195] - Bankruptcy or liquidation of VIEs could result in loss of material assets, adversely affecting the company's business and financial condition[195] - The Foreign Investment Law and its Implementation Regulations in China may impact the company's corporate structure, governance, and operations, with uncertainties regarding the classification of contractual arrangements as foreign investment[197] - The trading price of the company's ADSs has been volatile since their listing on March 8, 2019, and may continue to be influenced by regulatory developments, market rumors, and economic conditions[198] - The company's dual-class share structure concentrates voting power, with Class B ordinary shares holding 90.5% of the voting power despite representing only 32.2% of the total share capital[203] - The ADSs may be excluded from certain stock market indices due to the dual-class share structure, potentially affecting their market price and liquidity[203] - The company does not expect to pay dividends in the foreseeable future, and investors should rely on price appreciation of the ADSs for returns[204] - Substantial sales or perceived potential sales of ADSs in the public market could negatively impact the ADS price and the company's ability to raise capital[206] - Holders of ADSs have limited voting rights and must rely on the depositary to exercise voting rights on their behalf[206] - ADS holders may face limitations in voting rights and may not receive sufficient notice to withdraw shares for direct voting[208] - Future rights offerings may be limited for ADS holders, potentially causing dilution in their holdings[209] - Cash dividends may not be distributed to ADS holders if the depositary deems it impractical[210] - The deposit agreement can be amended or terminated without prior consent of ADS holders, with only 30 days' notice for disadvantageous amendments[212] - ADS holders may not be entitled to a jury trial for claims arising under the deposit agreement, potentially resulting in less favorable outcomes[212] - Transfer of ADSs may be limited due to book closures by the depositary for corporate events or emergencies[214] - Judgments obtained against the company by shareholders may not be enforceable due to the company's incorporation in the Cayman Islands[215] - Shareholders may face difficulties in protecting their interests due to differences in Cayman Islands corporate governance practices[216] - Anti-takeover provisions in the company's memorandum and articles of association could limit shareholders' opportunity to sell shares at a premium[218] - As a foreign private issuer, the company is exempt from certain U.S. securities regulations, potentially reducing protections for investors[218] - The company may be classified as a Passive Foreign Investment Company (PFIC) for US federal income tax purposes, which could subject US investors to significant adverse tax consequences[220] - The company's founder, chairman, and CEO, Mr. Leaf Hua Li, owns more than 50% of the total voting power, making it a "controlled company" under Nasdaq rules[220] - The company's audit committee consists of only two independent directors, relying on Cayman Islands corporate governance practices that differ from Nasdaq standards[220] - The company did not hold an annual shareholders' meeting in 2022, relying on a home country practice exemption[220] - The company expects to incur significant expenses and devote substantial management effort to ensure compliance with Section 404 of the Sarbanes-Oxley Act[223] - The company may face increased costs and difficulties in obtaining director and officer liability insurance due to its public company status[223] Client and User Metrics - The company serves approximately 21.6 million users as of December 31, 2023[232] - The average client age is 38, with average paying client assets of over HK$280,000 as of December 31, 2023[232] - Paying clients increased from 1,244,222 in 2021 to 1,710,106 in 2023, representing a 15.0% year-over-year growth[234] - Total client asset balance grew from HK$407.8 billion in 2021 to HK$485.6 billion (US$62.2 billion) in 2023[234] - The company's paying clients had an average asset balance of HK$284,000 in their trading accounts as of December 31, 2023[281] - The company retained an average of over 98% of its paying client base on a quarterly basis during 2021, 2022, and 2023[281] - The number of paying clients increased from 1,244,222 in 2021 to 1,710,106 in 2023[282] - The company's user base grew from 17,374,296 in 2021 to 21,643,536 in 2023[282] Marketing and Advertising - The company has incurred significant expenses in advertising and marketing efforts, which may not be effective and could adversely affect net margins[117] - The company's marketing team expanded from 138 in 2021 to 340 in 2023[288] - Selling and marketing expenses decreased from HK$1,392.1 million in 2021 to HK$710.3 million (US$90.9 million) in 2023[288] Platform and Trading Services - The company's margin financing, securities lending, IPO loans, and stock-pledged loan businesses depend on adequate funding at reasonable costs, which cannot be assured[96] - The company launched an online wealth management product distribution service in August 2019, but lacks necessary licenses for fund services in Mainland China, risking penalties and business suspension[110] - The company's revenue heavily depends on brokerage commission income, which is tied to the total trading volume facilitated by its platform[117] - Fraudulent or illegal activities on the platform could harm the company's brand, reduce trading volume, and lead to regulatory inquiries or investigations[119] - The company faces risks related to outdated or inaccurate client information, which could result in legal or regulatory sanctions, fines, or reputational damage[119] - The company's platform relies on complex software, and undetected errors or bugs could harm its reputation, delay new features, or compromise data protection[119] - A significant decrease in liquidity could reduce client confidence, lead to loss of trading accounts, and force the company to seek external financing[122] - Interest income from uninvested client cash balances was HK$2,482.9 million (US$317.9 million) in 2023, and a reduction in cash allocations could negatively impact financial results[123] - Errors in clearing functions could lead to regulatory fines, civil penalties, and legal liability, adversely affecting the company's operations and financial condition[123] - The company's success depends on retaining key employees, and failure to do so could adversely affect its business, results of operations, and financial condition[125] - The company faces potential liability for content displayed on its platform, which could materially and adversely affect its business and operating results[130] - The company's proprietary cross-market system allows clients to trade on multiple exchanges from a single platform, with account opening completed in as little as three minutes[290] - The platform is capable of processing 1,012 Hong Kong listed securities trades per second as of December 31, 2023[248] - Clients are required to transfer a minimum of HK$10,000 or US$1,500 into their trading account to complete online identification verification[242] - Bank-to-brokerage fund transfers can be completed in as fast as a few seconds, and are normally completed within five minutes[243] - The platform supports fund transfer services for multiple currencies including Hong Kong dollar, US dollar, offshore RMB, Singapore dollar, Australian dollar, Japanese Yen, and Canadian dollar[243] - The platform provides comprehensive order types including limit/market order, stop loss limit/market order, and TWAP/VWAP order[246] - The company launched bond trading services on Futubull in September 2020 and on moomoo in February 2023, charging clients a fixed commission rate based on trading volume[256] - The company started offering structured products on Futubull in June 2022, including Decu, Sharkfin, Snowball, and FCN notes for professional investors[256] - The company offers real-time stock quotes across equity markets in Hong Kong, Mainland China, the United States, Singapore, Australia, Japan, Canada, and Malaysia[258] - The user community, NiuNiu/Moo Community, had over 1,700 enterprise accounts and generated approximately 124,000 user-generated content (UGC) per trading day in 2023[264] - The company acted as an underwriter for 117 Hong Kong IPOs and 13 U.S. IPOs from 2021 to 2023, including landmark IPOs like 4Paradigm and J&T Express[266] - As of December 31, 2023, the company had 414 IPO distribution and investor relations clients and 709 ESOP solutions clients[265] - The company

Group 1 - Futu Holdings Limited has surpassed 100,000 clients in Malaysia as of April 15, 2024, following the launch of its brokerage business on February 26, 2024 [1] - Futu Malaysia Sdn. Bhd., a subsidiary of Futu Holdings Limited, offers capital markets products and services through the moomoo platform [1] - The company received the Capital Markets Services License from the Securities Commission Malaysia on January 24, 2024 [1] Group 2 - Futu Holdings Limited operates as a technology company that provides fully digitalized financial services through its platforms, Futubull and moomoo [2] - The company offers a comprehensive range of investment services, including trade execution, margin financing, and wealth management [2] - Futu integrates social media tools to enhance connectivity among users, investors, and key stakeholders [2]

Investment Rating - The report suggests actively monitoring the company due to its strong market position and growth potential in both existing and new markets [2]. Core Viewpoints - The company is a technology-driven one-stop wealth management platform with a robust performance, achieving a revenue CAGR of 75% and a net profit CAGR of 125% from 2019 to 2023 [2]. - The company maintains a leading position in the Hong Kong and Singapore markets, with a strong user base and high retention rates [2]. - The company is expanding into overseas markets, including the United States, Australia, Canada, Japan, and Malaysia, which is expected to open new growth avenues [2]. Summary by Sections Company Overview - The company launched its Hong Kong online brokerage business in 2012 and has since expanded its licenses in Hong Kong and overseas [2]. - The founder, Mr. Li Hua, is the largest shareholder with high voting rights, while Tencent is the second-largest shareholder [2]. Financial Analysis - Revenue increased from 1.062 billion HKD in 2019 to 10.008 billion HKD in 2023, with a CAGR of 75% [19]. - The main revenue sources are brokerage commissions and interest income, accounting for over 90% of total revenue [19]. - Net profit rose from 166 million HKD in 2019 to 4.279 billion HKD in 2023, with a CAGR of 125% [22]. Market Position - The company is the largest retail internet broker in Hong Kong, with user numbers exceeding 40% of the local adult population [2]. - In Singapore, the company has achieved profitability for the first time in Q4 2023, with user numbers representing nearly 30% of the adult population [2]. Overseas Expansion - The company has launched operations in multiple international markets, including the U.S., Australia, Canada, Japan, and Malaysia, with Malaysia showing rapid growth in user acquisition [2]. - The company has submitted an application for a virtual asset trading platform license in Hong Kong, expected to be granted in June 2024 [2]. User and Asset Growth - The total number of users reached 21.6 million by the end of 2023, with a year-on-year growth of 10% [29]. - Total client assets increased to 485.6 billion HKD, reflecting a year-on-year growth of 16% [31]. Business Model - The company's revenue model includes transaction commissions, interest income, and other income sources such as foreign exchange services and financial product distribution [12]. - The company has a high-quality growth strategy focused on increasing assets under management (AUM) [29]. Regulatory Environment - The regulatory landscape has stabilized, allowing existing mainland clients to continue trading without disruption [42]. - The company is expected to benefit from the beta resonance of Hong Kong and U.S. stocks, enhancing its commission income [44]. Conclusion - The company is well-positioned for future growth, with a solid foundation in existing markets and promising expansion into new territories [2].

Investment Rating - The report maintains an "Outperform" rating for Futu Holdings with a target price of US$68.34, based on a current price of US$56.40 [3][8][22]. Core Insights - Futu Holdings reported total revenue of HK$10 billion for FY23, representing a year-on-year increase of 31%, and a net profit after tax (NPAT) of HK$4.6 billion, up 46% year-on-year, although both figures were below market expectations [6][22]. - The growth in revenue and profit was primarily driven by an increase in paying clients, client assets, and higher blended commission rates and interest rates [6][22]. - The company is expected to add 350,000 new asset clients in 2024, with continued expansion into international markets such as Japan, Canada, and Malaysia [6][22]. Financial Performance Summary - For FY23, Futu Holdings achieved a total revenue of HK$10,008 million, with a net profit of HK$4,279 million, reflecting a 31% and 46% increase year-on-year, respectively [5][22]. - The company’s earnings per share (EPADS) for FY23 was HK$31.0, with a return on equity (ROE) of 18.85% [5][22]. - Revenue projections for the next three years are HK$10,792 million in 2024E, HK$11,964 million in 2025E, and HK$13,261 million in 2026E, with corresponding net profits of HK$4,877 million, HK$5,520 million, and HK$6,253 million [5][8][22]. Client Growth and Market Expansion - As of the end of 2023, Futu Holdings had 21.64 million registered users, a 10.5% increase year-on-year, and 1.71 million asset clients, up 15% year-on-year [6][22]. - The company’s total client assets reached HK$485.6 billion, a 16.3% increase year-on-year, with a high client retention rate of over 98% [6][22]. - Futu's international expansion efforts have begun to yield results, with its Singapore branch achieving profitability in Q4 2023 and new market entries planned for 2024 [6][22]. Revenue Breakdown - Brokerage commission revenue for FY23 was HK$3,944.8 million, with a slight decline of 1.6% year-on-year, while interest income surged by 72% to HK$5,536.4 million [5][6][22]. - Other operating income reached HK$527.2 million, reflecting a 34% increase year-on-year, driven by higher fund sales [7][22]. Cost Management - Total operating expenses for FY23 were HK$3,464.7 million, a 13.6% increase year-on-year, with a cost-to-income ratio of 35% [8][22]. - Research and development expenses accounted for 14% of total revenue, while sales and management expenses were 7% and 13%, respectively [8][22].