\u3000\u3000 China Stock Market News ( East Money Information Co.Ltd(300059) )
Key investment points:
Event: China stock market news ( East Money Information Co.Ltd(300059) ) released its 2021 annual report. The company achieved a total operating revenue of 13.094 billion yuan, a year-on-year increase of 58.94%, a net profit attributable to shareholders of listed companies of 8.553 billion yuan, a year-on-year increase of 79.00%, a basic earnings per share of 0.83 yuan / share, a year-on-year increase of 72.92%, and a weighted return on net assets of 22.11%, a year-on-year increase of 4.22 percentage points. By the end of 2021, the total assets of the company were 185.02 billion yuan, an increase of 67.70% over the end of 2020, and the net assets attributable to the parent company were 44.04 billion yuan, an increase of 32.83% over the end of 2020.
At the same time, according to the company’s announcement, the company used the funds after the convertible bonds of “Dongcai to 3” to supplement the capital of its subsidiary Dongcai securities. The company increased the capital of Dongcai securities with the creditor’s rights to Dongcai securities of 15.773 billion yuan and cash of 232 million yuan, with a total capital increase of 16.005 billion yuan. After the capital increase, the registered capital of China stock market news securities increased from 8.8 billion yuan to 12.1 billion yuan.
The performance in 2021 is in line with expectations, with high growth of core business. The company’s performance in 2021 is in line with our previous expectations and is basically consistent with the data disclosed in the previous performance express. Under the conditions of active market trading and high-level operation of two financing, the core business of the company will grow rapidly in 2021. The high growth of the company’s performance is mainly due to the year-on-year increase of the company’s three core businesses, financial e-commerce service revenue (fund consignment business), brokerage service fee net income and margin trading interest income, which mainly contribute to the profit. The company’s financial e-commerce service revenue, renewal fee and commission net income, interest net income and year-on-year increase are 5.073 billion yuan / + 71.25%, 7.687 billion yuan / + 54.30% and 2.321 billion yuan / + 51.11% respectively, And the company’s self operated business income increased significantly year-on-year, with an increase of + 228.12%.
The company’s proprietary business is expected to continue to contribute to the future performance. The scale of the company’s proprietary business continued to expand. At the end of 2021, the scale of trading financial assets continued to expand to 33.571 billion yuan, an increase of 161.62% over the end of 2020. The company’s capital increase of 16 billion yuan to Dongcai securities is conducive to the company’s further expansion of self operated business scale, and self operated business is expected to continue to contribute to the company’s performance. Under more conservative yield assumptions (3%), we estimate that the annual self operated business income will reach 1.768 billion yuan in 2022, with a growth rate of + 76.77%.
It is estimated that the market share of stock based trading and two financing will both increase in 2021. In 2021, the average daily share based trading volume of the market was 1.37 trillion yuan, with a year-on-year increase of + 25.33%. It is estimated that the share based trading volume of the company increased year-on-year, realizing a net income of 4.437 billion yuan from brokerage services. We calculate that the average commission rate of the company is about 0.21 ‰, and the share of the company’s share based trading market increased from 3.10% in 2020 to 3.80%. In the future, based on the flow realization mode of the company’s Internet financial service platform, we expect that the market share of the company’s brokerage business is expected to continue to increase, and the share based market share of the company is expected to increase by 0.7 percentage points to about 4.5% in 2022.
At the end of 2021, the company financed 43.441 billion yuan, an increase of 44.46% over the end of 2020, and its market share further increased to 2.54% from 2.03% at the end of 2020. In 2021, the net interest income of Liangrong increased significantly year-on-year, with a growth rate of 71.35%. Assuming that the financing balance is about 1.6 trillion yuan in 2022, and assuming that the market share of the company’s dual financing continues to increase to about 3.49%, the company’s net interest income is expected to be 2.741 billion yuan in 2022, with a growth rate of about 18%.
In 2021, the fund sales increased by 72.49%, firmly optimistic about the long-term growth trend of the company’s wealth management. The company is the leader in the wealth management track. In 2021, the fund sales reached 2238571 billion yuan, with a year-on-year increase of 72.49%. According to the data of China stock market news, at the end of the fourth quarter of 2021, the sales holding scale of Tiantian fund under China stock market news was 673.9 billion yuan, and the sales holding scale of equity public funds was 537.1 billion yuan, both ranking third in the market. The sales holding scale of non cargo based funds increased by 18.92% compared with the end of the third quarter, and the sales holding scale of equity public funds increased by 10.95% compared with the end of the third quarter. We believe that Tiantian fund, as a third-party sales service organization, is expected to further seize market share by virtue of its advantages in realizing Internet traffic.
Since the beginning of this year, public funds and new development funds have been cold. We believe that the market overestimates the impact of the cold of new development funds on the performance of funds every day. In terms of the income model of financial products sold by Tiantian fund on a commission basis, on the one hand, it earns the subscription and redemption expenses of the fund, including the subscription and redemption of new funds and old funds. In addition, a large part of the income comes from the fund management expenses of the corresponding fund holding scale. The cold issue of the new fund will have a certain impact on the subscription fee of the new fund of Tiantian fund, but we think the impact is limited; In terms of fund retention, Tiantian fund, as a third-party Internet consignment agency, under the background of the growth of residents’ demand for wealth management and the expansion of equity funds, relying on the advantages of Internet traffic realization, the market share of fund retention scale continues to increase and the basis for maintaining scale growth remains. We believe that the long-term growth trend of Tiantian fund remains unchanged.
Debt to equity swap to consolidate capital strength. The company issued 15.8 billion yuan of “Dongcai Zhuan 3” convertible bonds in April 2021. As of February 28, 2022, about 676 million shares of “Dongcai Zhuan 3” had been converted, with a conversion rate of about 99.91%, and all the remaining non converted shares had been redeemed (140612). After the conversion, the total share capital of the company increased from 10.366 billion shares to 11.012 billion shares. The company continuously consolidated its capital strength by issuing convertible bonds, expanded its subsidiary Dongcai securities Liangrong, self operated and other heavy asset businesses, expanded its business and strengthened its core business competitiveness. In September 2021, the company added 2.425 billion yuan to Dongcai securities. This time, the company added another 16 billion yuan to Dongcai securities.
Investment advice. As the leading company of the Internet financial service platform, the company has maintained a long-term competitive advantage in terms of the number of users and user stickiness. The company has realized the flow realization in the securities business and fund consignment business, has the core competitiveness and high growth space, and the company continues to enhance its capital strength, and its self operated business is expected to continue to contribute to the company’s performance. Based on the 2021 annual report and announcement information, we predict that the net profit attributable to the owners of the parent company in 2022, 2023 and 2024 will be 10.843/15.50/21.181 billion yuan respectively, with the corresponding growth rate of 26.77% / 43.41% / 36.21% respectively. According to the latest equity calculation, EPS will be 0.98/1.41/1.92 yuan / share respectively, and the current price will be 26.40x/18.41x/13.51x corresponding to PE from 2022 to 2024. Considering that the company’s market value in 202E is about 433.7-4.9 billion yuan, and the company’s market value is expected to maintain a reasonable recommendation of about 433.9-4.9 times in the future. Considering that the company’s market value of Internet services is expected to maintain a reasonable growth rate of about 4.9-4.9 times in 202E.
Risk warning: the expansion of public funds is less than expected; Trading activity decreased; Stricter financial supervision; The realization of Internet traffic was less than expected.
