Guotai Junan Securities·2024-08-22 08:45Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 430, corresponding to a 42x PE for 2024 [6][7]. Core Views - The company's revenue and net profit for the first half of 2024 are projected at HKD 10.62 billion and HKD 6.13 billion, respectively, showing a year-on-year increase of 0.4% and a decrease of 3.0%. The Q2 profit is HKD 3.16 billion, reflecting a year-on-year increase of 8.6% and a quarter-on-quarter increase of 6.2, which meets expectations [6]. - The report highlights that the improvement in Q2 performance is driven by a recovery in trading activity, with expectations that U.S. interest rate cuts and additional market-supporting policies will enhance the investment climate in Hong Kong, leading to revenue growth exceeding expectations [6][5]. Financial Summary - The financial summary indicates the following figures (in million HKD): - Revenue: 19,190 (2020), 20,950 (2021), 18,456 (2022), 20,516 (2023), 21,600 (2024E), 22,595 (2025E), 23,957 (2026E) [5]. - Gross Profit: 13,444 (2020), 14,915 (2021), 11,726 (2022), 13,385 (2023), 14,324 (2024E), 15,161 (2025E), 16,279 (2026E) [5]. - Net Profit: 11,505 (2020), 12,535 (2021), 10,078 (2022), 11,862 (2023), 12,673 (2024E), 13,419 (2025E), 14,416 (2026E) [5]. - The report notes a decline in investment income due to a reduction in margin size, with a year-on-year decrease of 5.8% to HKD 2.52 billion in the first half of the year [6]. Market Activity - The report states that the trading activity in the Hong Kong market has significantly improved, with the average daily turnover (ADT) reaching HKD 121.6 billion in Q2, which is a 22% increase quarter-on-quarter and an 18% increase year-on-year. The southbound ADT reached HKD 44.1 billion, reflecting a 42% increase quarter-on-quarter and a 47% increase year-on-year [6]. Future Outlook - The report anticipates that the U.S. Federal Reserve will enter a rate-cutting phase, which is expected to alleviate liquidity constraints affecting the Hong Kong market. This is projected to lead to a marginal recovery in market trading volume [6]. - The report also mentions that the China Securities Regulatory Commission has introduced measures to enhance cooperation with Hong Kong's capital market, which is expected to attract more quality mainland projects to list in Hong Kong [6].