\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 the first quarterly report of 2022. The company achieved a total operating revenue of 3.196 billion yuan, a year-on-year increase of 10.61%, a net profit attributable to shareholders of listed companies of 2.171 billion yuan, a year-on-year increase of 13.63%, a net profit attributable to parent company after deducting non recurring profits and losses of 2.004 billion yuan, a year-on-year increase of 5.34%, a basic earnings per share of 0.17 yuan / share, a year-on-year increase of 13.33%, and a weighted return on net assets of 4.33%, A year-on-year decrease of 1.27 percentage points. On a month on month basis, the company’s total operating revenue in the first quarter decreased by 7.58%, the net profit attributable to the parent decreased by 6.38% and the net profit attributable to the parent decreased by 13.25% after deduction.
The scale of the company showed an expansion trend, and the leverage showed a downward trend at the end of the first quarter. By the end of 2021, the total assets of the company had increased from 185.02 billion yuan at the end of 2021 to 202887 billion yuan, an increase of 9.66% over the end of 2021. The net assets attributable to the parent company had increased from 44.04 billion yuan at the end of 2021 to 59.618 billion yuan, an increase of 35.37% over the end of 2021. The company’s leverage ratio (excluding customer funds) decreased from 2.75 times at the end of 2021 to 2.24 times at the end of the first quarter. At the end of the first quarter, the company’s leverage ratio decreased by 18.55% compared with the end of 2021.
The performance was lower than our expectations, and the core businesses fell month on month. The company’s performance in the first quarter of 2022 was lower than our previous expectations. In the environment of sharp market fluctuations and declining market financing balance, the company’s three core businesses that mainly contribute to profits, including fund consignment business, net fee income of brokerage business and interest income of margin trading business, fell month on month, and the fund consignment business fell by 11.49% year-on-year. Specifically, the company’s operating income (mainly fund consignment business), net income from handling fees and commissions, net interest income and year-on-year / month on month growth were 1.24 billion yuan / – 11.49% / – 8.42%, 1.35 billion yuan / + 28.94% / – 9.15%, 606 million yuan / + 37.41% / – 2.10%, and the company’s self operated business income was 189 million yuan, a year-on-year increase of 15.24% and a month on month decrease of 50.91%.
The cold of new development funds in the first quarter dragged down the fund consignment business. In the first quarter, when the public funds and new funds were cold and the equity market fluctuated sharply, the company’s fund consignment performance fell by about 8% month on month. According to the statistics of wind, 209949 billion new public funds were issued in the first quarter, down 80% year-on-year and 63% month on month. Among them, only 113.4 billion equity (stock + hybrid) funds were issued, down 87% year-on-year and 61% month on month. The subscription and redemption shares of equity funds in old funds were 1883.8 billion, down 38.43% year-on-year and 8.42% month on month. We calculated that the market subscription / subscription and redemption shares of equity funds fell by 15% month on month in the first quarter, and the sales volume of market funds fell by 31% month on month under the influence of the decline of net value. We estimate that the company’s subscription / subscription and redemption expenses fell by 32.38% month on month. Assuming that the subscription / subscription and redemption expenses of Tiantian fund account for about 25% of the total income of Tiantian fund, it is expected that the subscription / subscription and redemption expenses in the first quarter will drag down about 8% of the operating income of fund consignment. The trailing Commission and sales service fee in the company’s fund sales on a commission basis account for about 70-80% of the company’s income from the sales of financial products on a commission basis. In the case of large fluctuations in the equity market, customers may make relevant adjustments in the capital allocation structure, and the equity fund will be transferred to creditor’s rights and monetary funds. It is estimated that the overall impact of the company’s fund holdings is small, and the impact on the company’s tail Commission and sales service fee is small. We believe that in the long run, 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 liquidity advantages of Internet traffic, the market share of fund retention scale continues to increase and the basis for scale growth remains. We believe that the long-term growth trend of Tiantian fund retention scale remains unchanged.
In the first quarter, the scale of self operated business expanded and the estimated rate of return declined. In the first quarter, the scale of the company’s proprietary business expanded significantly. At the end of the first quarter, the scale of the company’s financial investment reached 62.452 billion yuan, an increase of 14.851 billion yuan or 31.2% over the end of 2021. Among them, the scale of trading financial assets continued to expand from 33.571 billion yuan at the end of 2021 to 53.633 billion yuan, an increase of 59.76% over the end of 2021. In the first quarter, the company’s self operated business income was 189 million yuan. Affected by the sharp fluctuation of the market, the profit and loss from the change of fair value was – 255 million yuan, and the yield of the company’s self operated business decreased. We calculated that the annualized yield of self operated business in the first quarter was 1.37%.
In the first quarter, the company’s stock based transaction was estimated to be about 3.8%, and the market share of the two financial institutions was estimated to decline slightly. In the first quarter, the average daily stock based trading volume of the market was 1.09 trillion yuan, with a year-on-year increase of + 7.04% and a month on month decrease of 9.72%. It is estimated that the market share of the company’s stock based trading volume in the first quarter will remain at about 3.8%. In the future, based on the flow realization mode of the company’s Internet financial service platform, we expect the market share of the company’s brokerage business to still have room to improve. In the first quarter, the market financing balance showed a downward trend, falling from 1.71 trillion yuan at the end of 2021 to 158 million yuan, a decline of 7.67%. At the end of the first quarter, the company financed 29.697 billion yuan, down 8.55% from the end of 2021. It is estimated that the company’s market share fell slightly to 2.51% from 2.54% at the end of 2021.
Investment advice. Affected by short-term adverse factors in the market, the company’s performance is under pressure in the short term. In the medium and long term, as the leading company of Internet financial service platform, the company has maintained a competitive advantage in the number of users and user stickiness for a long time. The company has realized flow realization in securities business and fund consignment business, has 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 market conditions and the company’s announcement information, we lowered the company’s profit forecast. It is estimated that the net profit attributable to the owners of the parent company in 2022, 2023 and 2024 will be RMB 9.432/11.586/14.161 billion respectively, with the corresponding growth rate of 10.28% / 22.84% / 22.22% respectively. According to the latest share capital (13.214 billion shares), EPS will be RMB 0.71/0.88/1.07/share respectively, and the current price corresponds to PE of 29.21x/23.78x/19.46x from 2022 to 2024. Considering that the company is a leading company of Internet financial service platform and its future performance growth can be expected, we think it is reasonable to give the company 40-45 times PE in 2022, with a corresponding reasonable price of 28.55-32.12 yuan and a corresponding reasonable market value of 377.2-424.4 billion yuan, maintaining the “recommended” rating of the company.
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.
