Key investment points
Excellent research strength of marketization mechanism and accelerated rise of mixed transformation benchmarking: 1) mixed transformation benchmarking and excellent marketization mechanism. Founded in 2000, Tianfeng Securities, headquartered in Wuhan, Hubei Province, is a national comprehensive listed securities company with a full securities license. From 2012 to 2015, Tianfeng Securities experienced four rounds of capital increase and share expansion. After the company completed the joint-stock reform in 2012, it changed from a regional broker with only a single brokerage business to a fully licensed comprehensive broker with mixed ownership. It has successively increased the qualifications for margin trading, securities recommendation, financial product sales on a commission basis and provided intermediary services to futures companies. 2) As the benchmark of mixed ownership reform, Q1~3 Company has no controlling shareholders and actual controllers by 2020, with decentralized equity and diversified shareholder structure. The strength background of state-owned assets and the vitality of private mechanisms complement each other, and the company has grown rapidly under the excellent market-oriented mechanism. 3) The overall performance of the company is excellent, and the business structure is balanced. By the end of 2020Q1~3, the company's performance had bottomed out and rebounded, realizing an operating revenue of 3.432 billion yuan (+39.39% year-on-year), a net profit attributable to the parent company of 702 million yuan (+262.34% year-on-year), ROE of 4.65%, and its comprehensive scale has basically ranked among the quasi medium-sized securities traders. Brokerage, self operation and investment banking are the "troika" driving the company's performance, and the company's earnings are highly elastic.
The brokerage business accelerated the transformation of wealth management, and the high level of institutional sub warehouse highlighted the research strength. The business synergy is expected to gradually emerge: 1) Brokerage: the incremental institutional customer driven commission rate+market share rose both in volume and price (the market share in 2018 has reached 0.61%, up 36 pct from the end of 2016; the net commission rate rose against the market to 0.049%, significantly higher than the industry average). The company accelerated the wealth management transformation of brokerage business, played a synergistic role with Hengtai Securities (institution+retail), and steadily promoted resource integration. 2) Tianfeng Securities Research Institute rose rapidly after its establishment in 2016. It attracted star analysts to join with flexible mechanisms and generous incentives, and its research strength and influence increased significantly (in 2020, a total of 11 teams were listed in the "New Fortune" selection, and the Institute won the fifth place of the best local research team). In 2020, its institutional commission income from warehouse separation ranked 16 (in 2015, it ranked only 78). Relying on the strong market influence and appeal, Tianfeng Securities is starting to build a national level industrial research think tank, improve the voice and pricing power of the future market, incubate strategic emerging industry resources, pool funds, assets and resources to build a financial ecosystem, and build research into a driving force for the company's comprehensive financial services.
The value ratio of asset management is leading in the industry, and the overall market share of investment banks has further improved: 1) Asset management business: as of the first half of 2020, the total scale of the company's asset management business is 149.5 billion yuan, including 58.9 billion yuan for collective asset management, 29.8 billion yuan for targeted asset management, and 55.9 billion yuan for special asset management. In terms of rate, affected by the downturn in the overall asset management scale of the market, the annual comprehensive rate of the company's asset management business in the first half of 2020 was 0.28% (0.426% in 2019, based on the net income of asset management business/the total scale of entrusted funds), but still significantly ahead of the industry average of 0.139%. 2) Investment banking business: the market share of corporate investment banking business has increased in 2020, and by 2020Q3, the market share of fixed increase will reach 0.94% (0.15% in 2018); The bond underwriting market accounted for 2.3% (2018: 0.95%). The investment banking business is deeply rooted in Hubei, implements the strategy of collectivization and industrialization, provides all-round innovative services, vigorously expands the business of central enterprises in Hong Kong, and forms a synergistic effect of domestic and overseas mutual drainage. 3) Under the influence of the epidemic situation and the macro environment, the self operated business of the company will adopt the management idea of high Sharp rate and macro driving in 2020. By the end of 2020Q3, the revenue from proprietary business had reached 1.291 billion yuan, up 41% year on year.
Profit forecast and investment rating: based in Wuhan, the company is growing at a high speed relying on the state-owned assets strength+private marketization mechanism, with strong research strength, and is expected to achieve wealth management transformation and large investment bank business layout in the future. It is estimated that the net profit attributable to the parent company from 2020 to 2022 will be RMB 440 million, RMB 753 million and RMB 973 million respectively, corresponding to PE of 75.50x, 44.07x and 34.12x respectively, and corresponding PB of 1.80x, 1.74x and 1.66x respectively. "Buy" rating is given for the first time.
Risk tips: 1) The epidemic control is not as expected, leading to increased market volatility; 2) Risk of intensified industry competition; 3) Tighter regulation inhibits industry innovation; 4) Competition risk of foreign financial institutions; 4) Operation and management risks.
