Shenwan Hongyuan Securities·2025-09-04 09:54Investment Rating - The report maintains a positive outlook on the brokerage sector, highlighting investment opportunities driven by policy support and the beta characteristics of brokers in the context of low-risk interest rates and high household deposits [9][10]. Core Insights - The brokerage sector experienced a significant profit increase of 51% year-on-year in the first half of 2025, with a return on equity (ROE) of 3.75% [1][4]. - Key revenue drivers included proprietary trading and brokerage services, with a notable contribution from wealth management and international business as future growth areas [4][8]. Summary by Sections 1. Performance Overview - In the first half of 2025, 43 listed brokerages reported total assets of CNY 13.9 trillion, up 11% from the end of 2024, and net profit of CNY 1,001 billion, reflecting a 51% year-on-year increase [5][7]. - The main revenue sources were proprietary trading and brokerage, with brokerage income rising 45% year-on-year [7][18]. 2. Capital Business - The report indicates a balanced structure in financial investments between equities and bonds, with a widening interest margin supported by declining funding costs [6][19]. - Proprietary trading income (excluding long-term stock investments) increased by 44% year-on-year, driven by a market recovery in Q2 2025 [18][24]. 3. Light Capital Business - The light capital business saw a revenue increase, with brokerage income reaching CNY 673 billion, up 45% year-on-year, while investment banking income rose by 18% [18][24]. - The asset management sector faced challenges, with a 3% decline in revenue due to fee reductions [18][24]. 4. Future Performance Drivers - Wealth management is expected to benefit from low deposit rates and an improved investment environment, leading to increased market participation by households [8][10]. - The international business segment is also poised for growth, with frequent capital increases in international subsidiaries and significant contributions to overall performance [8][10]. 5. Valuation and Investment Recommendations - The report recommends focusing on leading firms within the brokerage sector, identifying winners based on competitive positioning, beta amplification, and alpha leadership [9][10]. - Specific recommendations include firms like Guotai Junan, CITIC Securities, and Huatai Securities, which are expected to outperform due to their strong market positions and growth potential [9][10].