KAIYUAN SECURITIES·2024-03-27 16:00Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The wealth management business is developing steadily, and the valuation has a margin of safety. The company's total revenue and net profit for 2023 were CNY 17.09 billion and CNY 2.75 billion, respectively, representing a year-on-year decline of 8.8% and 8.5%. The fourth quarter saw a net profit loss of CNY 100 million, consistent with preliminary reports. The average ROE was 3.45%, an increase of 0.71 percentage points from 2022. The leverage ratio at year-end (excluding client margin) was 3.46 times, up 9% from the beginning of the year. Investment income in Q4 decreased by 89%, impacting overall performance. For the full year, market volatility led to declines in brokerage, investment banking, and asset management net income, while investment income provided some support. Credit impairment provisions amounted to CNY 1 billion, which was a drag on performance. The net profit forecasts for 2024-2025 have been revised down to CNY 3.49 billion and CNY 4.01 billion, respectively, with a new forecast for 2026 at CNY 4.76 billion, corresponding to EPS of CNY 0.4, CNY 0.5, and CNY 0.6 [4][5][6]. Summary by Sections Financial Performance - In 2023, the company's total revenue was CNY 17.09 billion, down 8.7% year-on-year, while the net profit was CNY 2.75 billion, a decrease of 8.5%. The gross margin was 16.1%, and the net margin was also 16.1%. The ROE was 3.5% [6][7]. - The company's wealth management line, including Dongzheng Asset Management and Huitianfu, contributed an estimated profit of CNY 1.1 billion, down 35% year-on-year [4]. Business Segments - Brokerage business net income was CNY 2.78 billion, down 9.8% year-on-year, with a total of 2.69 million accounts at year-end, an increase of 10% [5]. - Investment banking revenue was CNY 1.51 billion, down 13% year-on-year, with an IPO underwriting of 7 deals totaling CNY 6.9 billion, a decrease of 11% [5]. - Proprietary investment income was CNY 2.39 billion, up 26% year-on-year, with an investment income rate of 2.36% [5]. Asset Management - Dongzheng Asset Management reported revenue and net profit of CNY 2.06 billion and CNY 490 million, respectively, down 24% and 41% year-on-year. The annualized ROE was 13% [4]. - Huitianfu's revenue and net profit were CNY 5.37 billion and CNY 1.42 billion, down 21% and 32% year-on-year, with an annualized ROE of 15% [4]. Valuation - The current stock price corresponds to a PB of 0.9 for 2024-2026, indicating a valuation with a margin of safety. The report maintains a "Buy" rating based on these valuations [4][5].