Futu: Turning Bullish On Strong Customer Growth (Rating Upgrade)

Core Viewpoint - Futu Holdings Limited (NASDAQ:FUTU) has been assigned a Buy investment rating following its strong financial performance in Q1 2024, with upward revisions in client growth guidance indicating a positive outlook for the company [1]. Financial Performance - Futu Holdings reported Q1 2024 revenue of HK$2,592.5 million, reflecting a +3.7% YoY increase and a +9.2% QoQ growth, surpassing market expectations by +1.2% [4]. - The diluted GAAP net profit per ADS for Q1 2024 was HK$7.46, down -11.6% YoY but up +18.2% QoQ, indicating a +8.0% earnings beat compared to consensus estimates [6]. - The company experienced a significant increase in trading volume, with Hong Kong and US trading volumes rising by +18.0% QoQ and +48.1% QoQ, respectively [5]. Client Growth and Market Expansion - Futu Holdings revised its FY 2024 new customer growth guidance upwards by +14.3%, from 350,000 to 400,000 net additions, following a strong Q1 performance where net new paying clients surged by +330.8% YoY to approximately 177,000 [8][9]. - The company has made notable progress in international markets, securing 100,000 paying users in Malaysia shortly after launching and reaching one million app downloads in Japan [8]. Cost Management and Efficiency - The decline in R&D and brokerage costs contributed to improved earnings, with R&D expenses down -5.5% YoY to HK$335.5 million and brokerage expenses down -16.5% YoY to HK$60.3 million [6][7]. - The company attributed the reduction in costs to stricter cost control measures and improved operating efficiency from transitioning to self-clearing for US operations [7]. Valuation Metrics - The current market valuation of FUTU is at 16 times the consensus next twelve months' P/E, significantly lower than its five-year average forward P/E ratio of 26 times, suggesting potential for valuation expansion as the company continues to grow its customer base [11].