EASTMONEY(SZ:300059) Guotai Junan Securities·2024-04-26 01:02Investment Rating - The report maintains a "Buy" rating and lowers the target price to CNY 22.40 per share, corresponding to a 40x P/E for 2024 [2][4]. Core Views - The decline in net profit is primarily due to insufficient demand for equity funds from residents and the pressure on fund distribution income caused by fee reforms. It is expected that increased investment in AI technology will drive growth in wealth management and B-end financial information services [2][3]. Financial Summary - In Q1 2024, the adjusted revenue (including investment income) was CNY 3.269 billion, a year-on-year decrease of 1.08%. The net profit attributable to shareholders was CNY 1.954 billion, down 3.70% year-on-year, which met expectations [2][3]. - The decline in net profit is mainly attributed to a 30% year-on-year drop in operating revenue (primarily from fund distribution income) to CNY 751 million, which contributed 91.5% to the total revenue decline. The demand for equity funds is low due to residents' risk aversion, leading to a 47% year-on-year decrease in the issuance scale of equity funds to CNY 50.1 billion. The fee reform for public funds implemented since July 2023 further exacerbated the decline in fund distribution income [2][3]. - Net interest income decreased by 5.39% year-on-year to CNY 522 million, contributing 83% to the total revenue decline. However, investment income significantly increased to CNY 812 million, up 64% year-on-year, with an investment return rate of 4.7%, which helped mitigate the decline in performance [2][3]. Cost and R&D Investment - Total operating costs decreased by 5.77% year-on-year to CNY 1.041 billion, mainly due to a reduction in management and sales expenses, which fell by 5.73% and 40.34% respectively. R&D expenses increased by 15.55% year-on-year to CNY 284 million, primarily due to ongoing investments in large models [2][3]. - The company has officially launched internal testing of its self-developed "Miaoxiang" financial large model, which is expected to enhance wealth management services and B-end financial information services through its data characteristics and algorithm advantages [2][3]. Market Catalysts - The active trading in capital markets and the continuous growth in demand for wealth management from residents are seen as catalysts for future growth [2][3].