20180607-广发证券_香港_-A-Share_Securities_Sector__Trading_recovered__19_listed_brokers_saw_May_net_profit_up_24__MoM_5页_974kb

A-Share Securities Sector Summary

Core Content

This document provides an analysis of the May 2018 performance of 19 A-share listed securities firms in China. It highlights the recovery in trading activity, the impact of market conditions on earnings, and the potential influence of new initiatives such as the China Depository Receipts (CDRs) and the Over-the-Counter (OTC) options business on the sector's future growth.

Key Financial Metrics

• Total May 2018 recurring net profit: Rmb4.21bn, up 24.0% MoM.
• Total May 2018 cumulative net profit (5M18): Rmb4.207bn, down 10.5% YoY.
• Total May 2018 revenue: Rmb10.86bn, up 19.9% MoM.
• Total May 2018 cumulative revenue (5M18): Rmb10.859bn, down 4.6% YoY.

Market Performance

• Trading Recovery: The total market turnover in May reached Rmb8.9trn, up 9.0% MoM due to the increased number of trading days.
• Equity Market: The CSI 300 index rose 1.2% MoM, while the ChiNext index declined 3.4% MoM, indicating a mixed performance in the equity market.
• Bond Market: The CSI Aggregate Bond Index increased slightly by 0.2% MoM, which is weaker than the 1.3% growth in April.
• Equity Financing: The value of equity financing in May was Rmb44.09bn, down 39.9% MoM.
• Margin Loans and Securities Lending: The balance of outstanding margin loans and securities lending stood at Rmb989.18bn, up 0.5% MoM and 13.7% YoY.

Earnings Divergence

• Top Performers:

  • Haitong Securities: Comprehensive income of Rmb918m, up 320% MoM.
  • CITIC Securities: Net profit of Rmb491m, up 100.4% MoM.
  • Industrial Securities: Comprehensive income of Rmb551m, up 872% MoM.
  • Huatai Securities: Comprehensive income of Rmb397m, up 39% MoM.
  • China Merchants Securities: Comprehensive income of Rmb300m, up 6% MoM.

• Bottom Performers:

  • Guoyuan Securities: Comprehensive income of Rmb(39)m, down 513% MoM.
  • Sinolink Securities: Comprehensive income of Rmb(8)m, down 118% MoM.
  • Guotai Junan Securities: Comprehensive income of Rmb(42)m, down 111% MoM.
  • Guosen Securities: Comprehensive income of Rmb(143)m, down 195% MoM.
  • SooChow Securities: Comprehensive income of Rmb(74)m, down 418% MoM.

Sector Valuation and Investment Outlook

• The sector is currently trading at 1.37x historical P/B and 1.27x 2018E forward P/B, indicating historically low valuations.
• Institutional investors' exposure to the sector has dropped to 0.5% in the first quarter of 2018, which is underweight by 3.5%.
• The implementation of CDRs is expected to benefit leading securities companies due to the requirement for comprehensive business strength and internationalized operations.
• The OTC options business is also anticipated to drive growth for industry leaders.

Sector Rating

• Positive: The sector is expected to outperform the Hong Kong Hang Seng Index by more than 10%.
• Neutral: The sector is expected to outperform or underperform the benchmark by less than 10%.
• Cautious: The sector is expected to underperform the benchmark by more than 10%.

Investment Highlights

• CDRs and OTC Options: These initiatives are expected to be key growth drivers for leading securities firms.
• Valuation Opportunities: Companies with historically low valuations, such as CITIC Securities, Huatai Securities, China Merchants Securities, and Haitong Securities, are recommended for attention.
• Earnings Divergence: There is a significant difference in performance among firms, with industry leaders standing out due to their balanced earnings structure and comprehensive competitiveness.

Risks

• Regulatory Tightening: Ongoing regulatory measures may affect the sector's performance.
• Market Liquidity: Financial de-leveraging is expected to reduce market turnover and liquidity.
• Bond Market Weakness: Continued weakness in the bond market may lead to lower fixed income investment returns.

Analyst Certification

The research analyst(s) certifies that the views expressed in the report accurately reflect their personal opinions and that no part of their remuneration is directly or indirectly linked to the specific recommendations or views in the report.

Disclosure of Interests

• GF Securities (Hong Kong) and its affiliated companies do not hold any shares of the securities mentioned in the report.
• There are no investment banking relationships with the companies mentioned in the report.
• The analysts and their associates do not serve as officers of the mentioned companies and have no financial interests in the securities.

Disclaimer

This report is for informational purposes only and does not constitute an offer to buy or sell securities. It is intended solely for use by clients of GF Securities (Hong Kong). The report may not be allowed to be sold in certain jurisdictions. GF Securities (Hong Kong) accepts no liability for any loss arising from the use of the materials presented in the report. Investments involve risks, and past performance does not guarantee future results. The report should not be taken as a substitute for professional advice.