Core Viewpoint - The brokerage sector is expected to benefit from the resonance of allocation power and performance elasticity, with a continued recommendation for comprehensive leading brokerages [1][2]. Summary by Sections Performance Overview - In the first three quarters of 2025, 42 listed brokerages achieved a total net profit attributable to shareholders of 169 billion yuan, representing a year-on-year increase of 62.4%. The main driver of performance improvement was the revenue increase from brokerage and proprietary trading businesses, with adjusted revenue (operating income minus other business costs) rising by 44.1% year-on-year to 416.5 billion yuan. The net profit margin attributable to shareholders increased by 4.6 percentage points year-on-year to 41% [1]. - On a quarterly basis, the adjusted revenue of listed brokerages in Q3 2025 increased by 27.2% quarter-on-quarter, while the net profit attributable to shareholders rose by 25.5% [1]. Business Segment Contributions - Analyzing the contribution of various business segments to adjusted revenue growth in the first three quarters, proprietary trading and brokerage businesses grew by 42% and 75% year-on-year, contributing 43% and 37% to net revenue growth, respectively. The improvement in proprietary trading was mainly due to the recovery of stock derivatives and equity businesses, as well as the realization of floating profits from OCI bonds [1]. - In other business areas, the investment banking sector saw a year-on-year growth of 23% due to the recovery in equity financing, while asset management business experienced a slight increase, expected to benefit from the growth in management scale [1]. Differentiation Among Brokerages - There is significant differentiation in performance growth drivers among brokerages. Large and medium-sized brokerages benefit more from proprietary trading transformations, while small and medium-sized brokerages primarily rely on brokerage business. The analysis indicates that large and medium-sized brokerages have advantages in the context of investment banking and asset management transformations, achieving positive revenue contributions, while small and medium-sized brokerages face more pressure [2]. - The transformation of proprietary trading has become a key issue in the industry, with differences in business models, transformation processes, and investment trading capabilities among brokerages leading to operational differentiation [2]. Investment Recommendations - The brokerage sector is expected to benefit from the dual drivers of allocation power (including the entry of resident funds) and performance improvement, with a positive outlook for the non-bank sector market. The continued recommendation for the brokerage sector is based on the high growth of Q3 performance and the anticipated gradual release of future performance [2].

Core Viewpoint - The brokerage sector is expected to benefit from the resonance of allocation power and performance elasticity, with a continued recommendation for investment in this sector [3]. Group 1: Performance Overview - In the first half of 2025, 42 listed brokerages achieved a total net profit attributable to shareholders of 104 billion yuan, representing a year-on-year increase of 65.1% [1]. - The main driver for performance improvement was the revenue increase from brokerage and proprietary trading, with adjusted revenue (operating income - other business costs) rising by 35.1% year-on-year to 247.3 billion yuan, while the net profit margin increased by 7.6 percentage points to 42.1% [1]. - In Q2 2025, adjusted revenue for listed brokerages increased by 16.2% quarter-on-quarter, while net profit decreased by 0.7% quarter-on-quarter, primarily due to the impact of a high base from significant non-operating income in some brokerages [1]. Group 2: Business Segment Contributions - In H1 2025, proprietary trading and brokerage businesses contributed significantly to adjusted revenue growth, with proprietary trading and brokerage businesses growing by 45% and 44% year-on-year, respectively, contributing 53% and 30% to net revenue growth [2]. - The investment banking business saw an 18% year-on-year increase, driven by a recovery in equity financing and high growth in Hong Kong stocks, while asset management business experienced a slight decline due to adjustments following the sale of Huatai Assetmark and a decrease in income from some brokerages' private asset management businesses [2]. - There is a notable performance differentiation among brokerages, with large and medium-sized brokerages benefiting from proprietary trading transformation, while small and medium-sized brokerages primarily rely on brokerage business [2]. Group 3: Investment Recommendations - The brokerage sector is expected to benefit from the dual drivers of allocation power (including the entry of resident funds) and performance improvement, leading to a positive outlook for the non-bank sector market [3].

Investment Rating - The report maintains a positive outlook on the brokerage sector, highlighting high profitability and valuation discrepancies under favorable market conditions [8]. Core Insights - In Q1 2025, the brokerage sector's net profit attributable to shareholders increased by 83% year-on-year and 19% quarter-on-quarter, driven by strong performance in brokerage and proprietary trading [3][14]. - The report emphasizes the growth in light capital business, particularly in retail brokerage, while investment banking faced challenges with IPOs but saw significant growth in refinancing [4][8]. - The investment business is identified as a key driver for the substantial year-on-year growth in performance, with a notable improvement in investment yield and a reduction in funding costs contributing to net interest income growth [5][8]. Summary by Sections 1. Overview - The brokerage sector experienced double-digit asset expansion and significant year-on-year profit growth, with improved operational efficiency [10][11]. 2. Light Capital Business - Retail brokerage business thrived, with brokerage income rising to 32.7 billion yuan, a 49% increase year-on-year, while investment banking income grew by 5% to 6.7 billion yuan [4][12]. 3. Capital Business - Investment income surged by 44% to 59.1 billion yuan, with proprietary trading income reaching 48.7 billion yuan, a 45% increase year-on-year [8][14]. 4. Investment Analysis and Valuation - The report recommends focusing on companies with strong merger and acquisition potential and those with high earnings elasticity, such as China Galaxy and CICC [8][19].