China Merchants Securities (600999): Net profit for the first quarter of every half year + 95% double optimization of business and mechanism

China Merchants Securities (600999): Net profit for the first quarter of every half year + 95% double optimization of business and mechanism

Event China Merchants Securities released the first quarter of 2019 report The first quarter of 2019, the company achieved operating income of 46.

460,000 yuan, +77 for ten years.

18%; realized net profit attributable to mother 21.

27 trillion, ten years +94.

82%; As of the end of 2018, the company’s equity was 828 to its parent shareholders.

33 trillion, earlier +2.

61%; BVPS 10.

13 yuan.

The short-scored performance exceeded expectations, mainly due to a threefold increase in investment income.

(1) Benefiting from the market recovery, in the first quarter of 2019, the company realized investment income (including changes in fair value).

USD 7.2 billion, + 286% per year; the expected average ROE for a single quarter is 2.

89%, ten years +1.

51pct, the best level in nearly two and a half years.

(2) According to the income statement caliber, in the first quarter of 2019, the company’s brokerage / investment bank / asset management / investment / credit business accounted for 24% / 7% / 5% / 49% / 10% of the operating income respectively.Has become the main source of income.

(3) The company’s current management expense ratio is 42.

30% per year -5.

04 pct, continue to maintain the highest level in the industry.

The heavy capital business has shrunk in scale, showing a solid capital style.

(1) Facing the bull market, the company adhered to the principle of matching the investment scale and management capabilities, and chose to increase the position instead.

As of the end of the first quarter of 2019, the company’s trading financial assets + investments in other equity instruments + debt investments + other debt investments totaled 1482.

950,000 yuan, compared with -1 at the beginning of the year.

36%.

(2) The company maintains its attitude towards the implementation of stock pledges and buys back resold financial assets 272 at the end of the period.

RMB 08 million, -18% lower than the beginning of the year; credit impairment losses reversed to 1.

1.7 billion, equivalent to 96% of the amount withdrawn in the previous period.

(3) From the perspective of the debt side, the company has short-term short-term financing bills due in the first quarter.

US $ 7.5 billion, which started -30% earlier; it is expected to resume the melting business twice and the bottom of the market interest rate, and the company may refinance the financing 北京夜网 process.

With the influx of client funds from the brokerage business, investment bank reserve projects are poised for development.

(1) In the first quarter of 2019, the company achieved net income from brokerage business10.

980,000 yuan, ten years +7.

84%.

At the end of the period, customer funds deposits + customer reserves totaled 738.

USD 8.6 billion, a 48% increase from the beginning of the year, and massive new customer transaction funds created a substitute for the expansion of long-term transaction volume.

(2) In the first quarter of 2019, the company realized net income from investment banking business3.

410,000 yuan, higher than -4%, the current equity underwriting amount of 83.

880,000 yuan, at least -67%.

At present, the company has 18 IPO projects (the third in the industry), including large-scale financing projects such as Bank of Chongqing and Bank of Dongguan.

Allotment of shares and repurchase strengthen capital, optimize the mechanism, and demonstrate the company’s development confidence.In March 2019, the company issued a rights issue plan to expand the plan to allocate shares to all shareholders at a ratio of 10 to 3 (the controlling shareholder and its concerted parties promise to fully subscribe). The raised capital of US $ 15 billion was mainly used for capital increase and diversification of subsidiaries.The layout (accounting for 70%), the sword refers to the science and technology board and investment and outsourcing mergers and acquisitions.

The company released a repurchase program at the same time, and plans to repurchase within 12 months6.

50,000-130,000 shares, used for equity incentives or employee shareholding plans, to deeply bind core employee interests; repurchase price 26.

35 yuan / share, far higher than the current price, showing the company’s confidence in long-term development.

Investment suggestion: “Buy” rating.

The performance of the securities brokerage sector in 2019 will continue to benefit from the easing of liquidity and the catalysis of capital market reforms. The long-term market is worth looking forward to; the industry’s supply-side reforms continue to advance, and capital strength improves (the net asset ranking in 2018 ranks 6th in the industry), and wind control is perfect (China Merchants Securities, which has received Class A and A ratings from the China Securities Regulatory Commission for 9 consecutive years, and improved innovation capabilities (PB business and product creation business continue to lead the way) will be one of the recognized beneficiaries.

Considering the impact of the rights issue on the dilution of BVPS, we expect China Merchants Securities to have a BVPS of 10 in 2019-2020.

14 yuan, 10.

77 yuan, corresponding to the current total PB is 1.

72X, 1.

62X, give “Buy” rating.

Risk warnings: stock market recovery fails to meet expectations; marginal easing of monetary and credit policies fails to meet expectations; capital market reform progress does not meet expectations.