Ping An View:
The performance of securities companies grew steadily, and the growth rate of asset management and brokerage business took the lead: 1) the market trading volume expanded significantly in 2021, with a daily average stock based turnover of 1.13 trillion yuan, an increase of 25.38% year-on-year. According to the data of China Securities Association, the revenue of the whole industry increased by 12.03% year-on-year to 502410 billion yuan, and the net profit increased by 21.32% year-on-year to 191119 billion yuan. 2) According to the annual report disclosed by 26 listed securities companies as of April 3, 2022 (the same below), proprietary business is still the largest source of income. The proportion of income from brokerage, investment banking, credit and proprietary business decreased by 1, 1, 1 and 2 percentage points to 21%, 10%, 9% and 26% respectively year-on-year, and the asset management business increased by 2 percentage points to 9% year-on-year.
Roe and leverage ratio rose simultaneously, and capital supplement intensified the internal competition in the industry: 1) the market share of net profit of CR10 reached 73.55%, which was the same as that in the same period last year, and the head pattern was relatively stable. 2) At the end of 2021, the total leverage ratio of listed securities companies was 4.13 times, and the roe reached 9.87%, with a year-on-year increase of 1.30pct; The roes of China Securities Co.Ltd(601066) , China International Capital Corporation Limited(601995) , China Industrial Securities Co.Ltd(601377) roe are 13.88%, 13.81% and 12.02% respectively, ranking among the top three. The major securities companies have stronger capital utilization efficiency. 3) The amount of self financing will be increased by 42.1 billion yuan in 2021, or the actual amount of self financing will be used for the further development of the securities industry.
The transformation of wealth management accelerated, and the capacity of OTC derivatives business expanded rapidly: 1) the market trading was active in 2021. According to the data of China Securities Association, the net income of brokerage business in the whole industry increased by 19.27% year-on-year; The transformation of wealth management accelerated, and the net income from selling financial products on a commission basis increased by 53.96% year-on-year, accounting for 13.39% of the brokerage income. 2) The IPO scale increased by 15.47%, reaching 542675 billion yuan, and the net income of investment banking business of the whole industry increased by 4.12% year-on-year. 3) The scale of asset management fell to 8.24 trillion, down 3.72% year-on-year. The contraction rate slowed down, the structure was optimized, the net income of asset management business in the whole industry increased by 6.10% year-on-year, and the profit contribution of public fund subsidiaries to securities companies increased significantly; 4) The growth of self operated income was stable. 26 listed securities companies achieved a total net income of 137049 billion yuan, a year-on-year increase of 12.64%; The net assets of the whole industry were 2.57 trillion yuan, a year-on-year increase of 11.26%; The demand for risk hedging drives the rapid expansion of the OTC derivatives market. By the end of 2021, the initial principal of OTC options and income swaps had increased by 30.87% and 96.91% year-on-year respectively. 5) The scale of the two financial institutions quickly climbed to 183 million yuan, and the net income of credit business of 26 listed securities companies increased by 15.04% year-on-year to 50.813 billion yuan.
Investment suggestion: China’s multi-level capital market system has been continuously improved, and the favorable policies of the securities industry have been continuously implemented, forming a long-term support for the valuation of the industry. At present, the average Pb of the industry is 1.81 times, which is lower than the historical valuation center and has long-term allocation value. In the current environment of repeated epidemics and changeable international situation, the market fluctuates greatly. We are optimistic about leading companies Citic Securities Company Limited(600030) , China International Capital Corporation Limited(601995) , which have strong anti cyclical ability, and continue to be optimistic about China stock market news with clear main line of wealth management for a long time.
Risk tips: 1) capital market reform is not as expected. 2) The equity market fluctuated sharply. 3) The epidemic has repeatedly affected investors’ risk appetite. 4) Macroeconomic downside risks.
