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].