Guotai Junan (601211) 19Q3 Review: Broker Credit Flexibility Significantly Accelerates Business Transformation

Event: In the third quarter of 2019, Guotai Junan achieved a cumulative operating income of 20.6 billion yuan (YoY + 23%, CITIC + 20% / Haitong + 55%), and its net profit was 65.

500 million (YoY + 19%, CITIC + 44% / Haitong + 106%); of which the third quarter operating income of 6.5 billion US dollars (YoY + 22%), attributed to the mother’s net profit of 15.

300 million (YoY + 2%).

The average return on equity in the first three quarters was 5.

19% (+0 compared to the same period last year).

72%, CITIC 6.

72% / Haitong 6.

09%).

Summary of highlights: We believe that the highlights of the company are: (1) The leverage ratio has increased significantly, and the previous cautious and prudent operating style has changed, accelerating the transformation in the changing industry.

In 2018, the leverage ratio was only 3 times, which substantially surpassed other head brokers. Since 2019, Guotai Junan has been operating more actively, and the leverage ratio in the third quarter of 2019 was 3.

35 times (2019H: 3.

51 times, the decline is related to the company’s issue of 50 trillion perpetual bonds).

(2) Brokerage credit business has obvious flexibility and has the advantage of a comprehensive financial platform on the head.

The company’s performance of brokerage credit business among the top brokers is relatively high, and it has the advantages of a correct integrated financial platform. The company builds an integrated operation model. The retail business and the institutional business each form an integration.Unified research and development cooperation mechanism.

(3南京桑拿网) It is estimated to be attractive.

Guotai Junan is currently estimated at about 1.

2xPB (compared to 2019Q3 BPS), referring to last year’s estimated bottom of only 20% of the downside, is also estimated to be at a low level among brokers, which is attractive.

The growth rate of brokerage income is leading among the brokers on the right.

The company’s brokerage business income in 2019Q3 was 45 million US dollars, + 28% per year. The flexibility of the brokerage business is more prominent among the brokers on the right (CITIC-2.

5% / Haitong + 12%).

We believe that the key to the company’s brokerage revenue performance is better than the industry. First, when the securities trading volume is picking up, the company has exerted its traditional advantages in the retail client.

Investment banks were generally 杭州桑拿网 stable and asset management improved slightly.

Revenue from investment banks for the third quarter of 201916.

9 yuan, YoY + 18% (CITIC + 23% / Haitong + 35%).

The number and scale of equity-type projects have decreased compared to the same period last year, but the scale of corporate bond underwriting has increased significantly.

5 times.

The company’s asset management revenue in Q3 2019 was 12 trillion, a year-on-year increase of +5.

5% (CITIC -1% / Haitong + 15%), mainly due to the significant increase in the scale of active management and improved the company’s asset management business structure.

Self-employed: scale is less flexible and FICC has advantages.

In Q3 2019, the company’s self-employed revenue was 5.5 billion (comparable caliber YoY + 21%), which is less obvious than other head brokers (CITIC + 95% / Haitong + 307%).

The scale of self-operated investment has increased significantly. In the third quarter of 2019, the scale of the company’s self-operated assets reached 253.5 billion U.S. dollars, an annual increase of 41%. The increase was mainly invested in bond assets.

The company’s FICC business has the first-mover advantage of a full license among brokers, transforming capital market reforms and the gradual liberalization of financial derivatives. We believe that the FICC business is expected to become a new profit growth point for the company.

Credit transactions: net interest income improved, and impairment was treated with caution.

In the third quarter of 2019, the company’s net interest income was 40 million U.S. dollars, an increase of 4% year-on-year (CITIC -14% / Haitong -12%), an improvement from the first half (YoY-8%), and gradually the company’s index income in the third quarterThe growth rate is even greater, and the increase is expected to come mainly from the two financial services (financing capital + 7% from the previous quarter).

The company is extra cautious about accrual of impairment, accrued in the third quarter2.

9 trillion, withdraw gradually 7.

800 million.

Investment advice: Buy-A investment rating.The company’s EPS for 2019-2021 is expected to be 1.

1 yuan, 1.

4 yuan and 1.

57 yuan, give 1.

4xPB estimate with 19-month target price of 19.

95 yuan.