Yong’an Futures (600927)
Key investment points
Overview of Yong’an Futures: the predecessor was established in 1992, and the actual controller is the Department of finance of Zhejiang Province; The business line covers brokerage, risk management, asset management, etc. Net profit has ranked first in the industry for consecutive years since 2014. Except for the market drag of – 5% year-on-year in 2018, the average annual growth rate of other industries has maintained more than 10%, and H121 has increased by + 80% year-on-year. Roe has been higher than 15% since 2017. The company is at the forefront of comparable companies in terms of indicators. It is the only company in the industry with AA rating for 11 consecutive years and has significant advantages in capital, brand and customer reserves.
Futures industry: business diversification opens up growth space, and the risk management function is irreplaceable. The futures industry has a small volume and strong homogeneity of brokerage business, but its business line has been expanding since 2011. Among them, in the risk management business exhibition industry in 2013, H121 profit accounted for more than 17%, with the fastest growth. Risk management business mainly includes OTC derivatives, basis trade and market making business. In 2021, the new nominal principal of OTC derivatives was + 60% year-on-year, the spot purchase and sales volume of H121 basis trade was + 40% year-on-year, and the market making transaction volume in August 2021 reached 8.7 times that in January 2019. In addition, the listing of new derivatives has been accelerated since 2014. At present, China’s floor futures + options have increased from 40 in early 2014 to 94, and the commodity derivatives market is relatively mature.
Yong’an business analysis: risk management business meets the double improvement of profit scale and profit margin. Yongan’s business layout is comprehensive. At present, brokerage and risk management contribute more than 90% of its performance. H121’s risk management profit is 181 million yuan, nearly twice that of the whole year of 2019. The profit proportion has increased from 8.6% in 2019 to 22.9% of H121, which has become a core business. The brokerage business contributes about 70% of the profits, and the average commission rate of the industry has shown signs of stabilizing. According to our sensitivity calculation, Yong’an is least affected by the fluctuation of transaction activity and commission rate. After this fund-raising, the capital is enriched, which is conducive to supporting the further growth of capital consuming risk management business; At the same time, the addition of branches is also expected to promote the expansion of brokerage business.
Investment suggestion: Yong’an has strong comprehensive strength, and its advantages are expected to be strengthened after listing, so as to further open the gap with its peers. We expect that the company’s net profit attributable to the parent company in 2021-23 will be RMB 1.801 billion, RMB 2.316 billion and RMB 2.783 billion respectively, with a year-on-year increase of + 57%, + 29% and + 20%; Roe exceeds 17%. For the first time, with reference to the historical and average valuation of comparable companies, 2022e is given a target Pb of 4.50x, the target price is deduced to be 43.60 yuan, and the rating of “Buy-A” is given.
Risk tips: the decline of scene tolerance in futures market, policy risk, intensified industry competition, customer credit risk, etc
