\u3000\u3000 China Stock Market News (300059)
Key investment points
Event: on January 20, 2022, Dongcai released the unaudited non consolidated financial statements of its subsidiary China stock market news Securities Co., Ltd. in 2021. In 2021, Dongcai securities realized a revenue of 7.300 billion yuan, a year-on-year increase of + 58.86%; The net profit was 4.825 billion yuan, a year-on-year increase of + 66.74%.
The performance of retail securities continued to increase, and the investment scale and income performance were brilliant: 1) thanks to the market activity and user advantages, the brokerage business of Dongcai securities continued to maintain high growth. In 2021, the average daily turnover of stock base in the market was 1133.9 billion yuan (year-on-year + 25%). Under the background of high market activity, with its huge retail user scale and flow conversion capacity, Dongcai securities has increased the share of stock trading market in Tibet to 3.51% by December 2021 (the overall share of Dongcai securities is higher), driving the net income of handling fees and commission of Dongcai securities to reach 4.546 billion yuan, a year-on-year increase of + 52%. 2) The market share of two financial services continued to rise, and the net interest income grew steadily. In 2021, the balance of two financial services in the market increased by + 13.17% year-on-year to RMB 1832.2 billion. In recent years, the working capital of Dongcai securities has been effectively supplemented, and the market share of two financial services has continued to rise, reaching 2.29% at the end of 2021 (1.03% in 2018). In 2021, the net interest income of Dongcai securities increased by 39% year-on-year to RMB 1.749 billion. We believe that it is mainly due to the significant provision of interest expenses due to the company’s bonds payable increased by + 198.96% year-on-year to RMB 10.3 billion. 3) The investment income maintained a high growth, and the proprietary business of Dongcai securities continued to shine. In 2021, the trading financial assets of Dongcai securities reached 32.796 billion yuan, a year-on-year increase of + 163%; The total investment income (net investment income + net income from changes in fair value) reached 928 million yuan, a year-on-year increase of + 225%. We expect that with the improvement of the company’s investment and research ability and the continuous enrichment of investment strategies, it will continue to promote the business development of the company’s self operated investment.
On January 17, 2022, the company issued a suggestive announcement that “Dongcai Zhuan 3” may meet the redemption. We expect convertible bonds to supplement working capital and improve the comprehensive strength of securities companies: 1) since the recalculation date (January 1, 2022), as of January 20, 2022, The share price of the company has exceeded 130% of the share price of “Dongcai Zhuan 3” (23.35 yuan) for 13 consecutive working days. On January 20, 2022, the closing price of Dongcai stock was 33.73 yuan (144% of the conversion price). If the future stock price remains stable, we expect to trigger the redemption terms on January 24; 2) Convertible bonds supplement working capital, and Dongcai securities has leapt into the first echelon of securities companies. The issuance of “Dongcai Zhuan 2” effectively supplements the working capital of Dongcai securities, and then forms a strong support for the business development of Dongcai securities. According to the data released by the Securities Industry Association, compared with 2019, the net asset scale of Dongcai in 2020 increased by 9 to 24; Operating income rose 10 to 23, entering the first tier of securities companies. With the issuance of “Dongcai Zhuan 3”, Dongcai credit and securities investment business is expected to further expand and continue to achieve high growth of Dongcai securities.
The Internet financial platform is developing well and optimistic about the new era of wealth management: 1) with the rapid development of the equity market, the advantages of the company’s platform are prominent, and the scale of fund ownership continues to rise. By Q3 of 2021, the number of non monetary public funds held by Tiantian fund had increased by + 13.95% to 578.3 billion yuan month on month, and the market share had increased by 0.31pct to 3.99% compared with 2021q2, surpassing Industrial And Commercial Bank Of China Limited(601398) (market share: 3.91%) for the first time, with significant advantages in platform scale expansion. We expect that with the continuous growth of residents’ wealth and the continuous expansion of Internet users, the income of the company’s fund consignment business will continue to increase. 2) The securities and fund sectors share the dividend of wealth management transformation and are optimistic about the company’s long-term development potential. With the approval of the investment advisory license of Dongcai securities, with the continuous improvement of investment advisory business demand, securities companies have their own advantages in product design, sales and investment consultants. In addition, Dongcai has three core advantages in the field of wealth management: high flow, low cost and high-quality service. Dongcai securities will make great achievements in investment consultants and customer asset allocation in the future.
Profit forecast and investment rating: at present, China’s capital market has entered the golden development cycle. With the acquisition of fund investment advisory license and the acceleration of multi platform flow transformation, the company’s wealth management business will enter a good development period. We raised the forecast of net profit attributable to the parent company from RMB 8.16/11.09/13.93 billion to RMB 8.408/110.92/13.93 billion from 2021 to 2023, corresponding to the adjustment of EPS from RMB 0.79/1.07/1.35 to RMB 0.81/1.07/1.34 from 2021 to 2023; The current market value corresponds to P / E41 from 2021 to 2023 59 / 31.52/25.10x, maintaining the “buy” rating.
Risk tips: 1) market transaction activity decreases; 2) The market share of Dongcai securities was lower than expected; 3) The macro-economy is less than expected; 4) Market fluctuations impact proprietary investment income
