GUOLIAN SECURITIES(601456)：FEE INCOME BETTER THAN PEERS;INVESTMENT BUSINESS IMPRESSIVE

1H22 results in line with our expectations
Guolian Securities reported its 1H22 results: Revenue rose 13% YoY to Rmb1.27bn (vs. -11% for sector) and attributable net profit rose 15.4% YoY to Rmb437mn (vs. -10% for sector), with reported annualized ROAE down 1.8ppt YoY to 5.3%. The results are in line with our expectations. Its results outperformed that of peers thanks to YoY rise in fee income and steady improvement of investment business amid falling exposure to directional investment. Its 2Q22 attributable net profit rose 12% YoY and 32% QoQ to Rmb248mn. The firm’s 1H22 adjusted G&A expense ratio rose 4.6ppt YoY to 57.3%, and end-2Q22 leverage ratio was 4.0 times (-0.6 YoY and +0.3 QoQ).
Trends to watch
Wealth management outperforming peers. 1) The firm’s brokerage income rose 6.4% YoY to Rmb264mn in 1H22 (vs. +0.5% YoY for the sector), and rose 4.8% YoY and fell 9.1% QoQ in 2Q22. The A-share market’s average daily turnover rose 9.5% YoY in 1H22, and the firm’s market share for stock and fund turnover rose 0.05ppt YoY to 0.5%, driving 7.2% YoY growth in net income from agency sales of securities. Guolian’s 1H22 agency sales of financial products rose 2.5% YoY to Rmb21.6bn, but net income from agency sales of financial products fell 26% YoY due possibly to adjustment in product structure. Number of clients of fund investment advisory rose 34% HoH to 201,700, but the assets of authorized accounts fell 28% HoH to Rmb7.4bn due to market fluctuations. 2) Net interest income fell 29% YoY to Rmb70.2mn in 1H22 (vs. -4% YoY for the sector). Specifically, interest income from margin trading and short-selling rose 2% YoY to Rmb281mn, and end-2Q22 balance fell 7% YoY to Rmb9.4bn, with market share rising 0.02ppt YoY to 0.59%. Interest income from stock pledges and other liabilities investment grew 21% and 93% YoY. Balance of bonds rose 35% YoY in 1H22, driving a 30% YoY rise in interest expenses.
IB and AM businesses maintaining high growth on low base. 1. The firm’s investment banking (IB) income rose 45% YoY to Rmb245mn in 1H22 (vs. flat for the sector), and declined 3% YoY and 50% QoQ in 2Q22. The amount of equity underwriting reached Rmb1.0bn, which was all contributed by IPOs (vs. Rmb2.8bn in 1H21 all driven by follow-on offering). The amount of bond underwriting fell 2% YoY, and market share remained flat at 0.25%. 2. Guolian’s income from asset management (AM) rose 53% YoY to Rmb75mn in 1H22 (vs. -8% for the sector), and rose 41% YoY and 16% QoQ in 2Q22. Specifically, AM income from collective, specialized, and single asset management schemes rose 44%, 22%, and 1% YoY. End-2Q22 asset under management (AUM) increased 35% YoY, with the AUM of specialized schemes up 131% YoY.
Investment business rising despite sector declines. The firm’s investment income grew 13% YoY in 1H22 (vs. -38% for the sector), and increased 6% YoY and 71% QoQ in 2Q22. The firm remained resilient despite market fluctuations thanks to development of capital intermediary business and control over directional equity exposure. Annualized investment returns of financial assets fell 1.4ppt YoY to 3.4%. End-1H22 balance of held-for-trading financial assets grew 83% YoY to Rmb39.6bn, with bonds, equities, funds, and others respectively taking up 56%, 2%, 21%, and 21%.
Financials and valuation
We maintain our 2022–2023 earnings forecasts unchanged. A-shares are trading at 1.9x 2022e and 1.8x 2023e P/B, and H-shares at 0.62x 2022e and 0.58x 2023e P/B. We maintain OUTPERFORM for A-shares and H-shares with TP at Rmb13.8 (2.3x 2022e and 2.2x 2023e P/B with 20.4% upside) and HK$5.4 (0.8x 2022e and 0.7x 2023e P/B with 22.7% upside).
Risks
Market fluctuations; regulatory uncertainties; disappointing business transformation
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。