Summary of Key Points from the Conference Call Industry Overview - The A-share market's Average Daily Trading Volume (ADTV) reached Rmb 2 trillion in 3Q25, representing a year-over-year increase of +153% and a quarter-over-quarter increase of +37% [14][1] - Overall trading volume in the A-share market reached Rmb 134 trillion, with a year-over-year increase of +161% and a quarter-over-quarter increase of +51% [14][1] - Household savings are expected to continue flowing into capital markets, indicating a robust trend in brokers' earnings performance [1] Company-Specific Insights GFS (GF Securities) - GFS is well-positioned to benefit from strong trading volumes, with revenue from brokerage and wealth management constituting 49% of total revenue in 1H25 [11][20] - Projected combined revenue from brokerage and wealth management for GFS in 3Q25 is Rmb 4.7 billion, growing by +60% year-over-year and +21% quarter-over-quarter [11][20] - GFS's investment banking revenue is expected to reach Rmb 225 million, with a year-over-year growth of +15% and a quarter-over-quarter growth of +36% [21][1] CICC (China International Capital Corporation) - CICC's profit growth is projected to be +234% year-over-year in 3Q25, with a quarter-over-quarter decline of -8% [42][1] - Investment banking revenue for CICC is expected to reach Rmb 876 million, with a year-over-year growth of +12% and a quarter-over-quarter decline of -31% [21][1] East Money - East Money is expected to show strong year-over-year gains in 3Q25, with estimated net profit growth of +52% [35][1] - However, the company faces challenges to sustained growth, with forecasts for 2025 and 2026 showing declines of -2% and -10% compared to consensus [35][1] Hundsun - Hundsun's core revenue growth is expected to be muted in 3Q25, with a forecast of Rmb 1.4 billion, reflecting a year-over-year growth of +5% and a quarter-over-quarter growth of +1% [37][1] - Despite short-term challenges, growth in non-core income is anticipated to provide a safety cushion for overall earnings growth [40][1] Market Trends and Dynamics - The share of ETFs in the A-share market's trading volume reached 20% in 3Q25, an increase of +4 percentage points year-over-year [10][17] - The expansion in ETF trading volume is expected to become a more significant driver of brokerage revenue than commission rates [12][1] - The regulatory initiative to reduce fund management fees is nearing its conclusion, which may stabilize revenue from fund distribution [12][1] Cost and Income Ratios - Brokers' cost-to-income ratios and forward guidance will be critical as they may need to increase headcount, leading to additional costs [22][1] - Forecasted costs for CICC and GFS are Rmb 4.7 billion and Rmb 4.6 billion, reflecting increases of +20% and +7% year-over-year [22][1] Investment Recommendations - Buy ratings are maintained for GFS-A, CICC-H, and Hundsun, while a Sell rating is reiterated for East Money [9][1] - GFS is expected to benefit more from improvements in the A-share market, while CICC's earnings are more influenced by the H-share market [42][1] Conclusion - The overall outlook for brokers in 3Q25 indicates strong performance driven by increased trading volumes and a recovering capital market, although challenges remain for specific companies like East Money and Hundsun [42][1]

Investment Ratings - CICC-H: Buy [1] - FUTU: Neutral [1] - Hundsun: Buy [1] - East Money: Sell [2] Core Insights - Broker and fintech stocks have shown strong performance since May, with average returns of +27% for brokers and +9% for fintech, compared to +8% and +3% for the H/A share index [1] - Positive changes in Average Daily Trading Volume (ADTV) and turnover rates, along with growth in the Hong Kong market, are expected to drive earnings improvement [1][4] - Earnings forecasts for CICC, Hundsun, FUTU, GFS, and CITICS have been revised upwards by an average of 7% for 2025 [1][31] Summary by Sections Stock Selection Preferences - Preference for brokers with greater exposure to the Hong Kong market, such as CICC-H, while maintaining a Neutral rating on FUTU due to limited excess earnings growth [2] - For fintech, Hundsun is preferred over East Money due to fundamental factors, including recovery in non-core revenue supported by investments [2][26] Market Trends and Revisions - ADTV and turnover rates have recovered since June, primarily due to the easing of tariff shocks [4][12] - Continued increase in ETF market share is expected to impact East Money's profitability negatively [26] Earnings Forecasts - CICC's net profit forecast for 2025 has been raised by 13%, reflecting anticipated growth in Hong Kong investment banking revenue [17][22] - FUTU's earnings forecast has been slightly raised by 1% for 2025, driven by reduced customer acquisition costs [21][22] - Hundsun's net profit forecast for 2025 has been increased by 13% due to higher investment income [31] Valuation and Price Targets - CICC-H has a target price of HK$ 17.58 based on a 10x 2026E P/E [36] - FUTU's target price is set at US$ 111.79 based on an 18x 2026E P/E [36] - Hundsun's target price is Rmb 32.04, reflecting its market presence and sustainable customer relationships [46]