Event Overview
Cinda Securities disclosed its 2022 annual report. In 2022, the company will achieve an operating revenue of 3.437 billion yuan, yoy 9.61%; a net profit attributable to the parent company of 1.227 billion yuan, yoy+4.75%; and an average diluted ROE of 8.97%, a decrease of 0.44 percentage points from 2021. By the end of 2022, Cinda Securities had total assets of 65.75 billion yuan and net assets of 13.682 billion yuan. As of March 13, 2023, the total share capital of the company is 3.243 billion shares. Profit distribution plan in 2022: cash dividends of 0.44 yuan (tax included) will be distributed for every 10 shares, totaling about 143 million yuan, accounting for 11.63% of the net profit attributable to the parent company in 2022.
Cinda Securities was approved by the CSRC for IPO in December 2022 and listed on the Shanghai Stock Exchange on February 1, 2023, with an offering price of 8.25 yuan per share and an initial offering of about 2.675 billion yuan.
The proprietary business dominated by cost control and fixed income investment has become a profitable ballast. In 2022, the brokerage business (including brokerage business, credit business and financial product consignment) of Cinda Securities will achieve revenue of 1.417 billion yuan, yoy-15.90%, accounting for 41.21%; The revenue from self operation is 247 million yuan, yoy+12.80%, accounting for 7.19%; Investment banking revenue was 169 million yuan, yoy-61.64%; asset management revenue was 344 million yuan, yoy+3.79%, accounting for 10.00%; Futures brokerage achieved revenue of 208 million yuan, yoy+1.92%, accounting for 6.06%; Overseas business achieved revenue of 98 million yuan, yoy-52.11%, accounting for 2.84%; Other business revenue was 955 million yuan, yoy+32.65%, accounting for 27.79%. Other businesses of the company mainly include private investment fund business, alternative investment business, fund management business and other businesses of the headquarters.
In 2022, the Company's proprietary business will dynamically adjust the proportion of asset allocation such as equity and fixed income, and appropriately expand the scale of non directional investment. The company's fixed income business takes high-grade and short-term bonds as the investment target, moderately increases leverage, obtains stable coupon, and assists the strategy of cash bond band arbitrage.
The operating revenue of other business segments was 955 million yuan, accounting for 27.79% of the operating revenue in 2022, up 32.65% year on year; The change in operating income of other business segments was mainly caused by the growth of management fee income of the subsidiary Cinda Australia Asia Fund (Cinda Securities holds 54% of it) (revenue of 1.068 billion yuan and net profit of 213 million yuan in 2022), and the growth of business income of the company's research and development center.
The business and management expenses of the Company in 2022 will be 1.95 billion yuan, a decrease of 15.68% compared with 2.312 billion yuan in 2021. The main reason for the decrease of business and management expenses is the decrease of employee compensation expenses.
In terms of two financing risk management, investment bank underwriting of local government bonds and cost control credit business, the company focuses on building an investment advisory service system for two financing customers. In 2022, there will be no new default customers in the company's margin trading business, and the overall maintenance guarantee ratio will be 262.72%.
Cinda Securities Investment Bank completed 2/1 IPO projects respectively in 2020/2021, with an initial offering of 1.502/778 billion yuan; No IPO project will be listed in 2022. In 2022, the investment bank underwrote 52 local government bonds (the issuer is the People's Government of Guizhou Province) and raised 6.124 billion yuan, ranking 21st. The company fulfills the responsibility of the central enterprise securities company and participates in the underwriting and distribution of local government bonds. By the end of 2022, it has signed annual local bond underwriting agreements with 23 provinces and cities.
The shareholder's qualification is extraordinary, and the characteristic business potential is huge
The controlling shareholder, China Cinda, holds 78.67% of Cinda Securities. The benign synergy ecosystem of China Cinda and its subsidiaries gathers customer acquisition channels, business information, business opportunities and other resources, and is expected to achieve customer centered all-round business collaboration by taking advantage of the company's business qualifications and investment research capabilities. We believe that as an important platform for China Cinda's financial sector, Cinda Securities is expected to become a key link for China Cinda to coordinate the financial business within the group and connect the domestic capital market. In the process of disposing non-performing assets, participating in enterprise mergers and acquisitions, and providing comprehensive financial services, China Cinda Group will derive a large number of financial advisory, asset securitization, debt restructuring and debt equity swap projects, which will become the business source of Cinda Securities' characteristic development.
Investment advice
Although the operating revenue of Cinda Securities in 2022 is 3.437 billion yuan outside the range predicted in the prospectus on December 23, 2022 (3.5-4.1 billion yuan), the net profit attributable to the parent company is 1.227 billion yuan within the range predicted in the prospectus (1.081-1265 billion yuan). As of March 20, among the listed securities firms that disclosed their performance forecasts or performance bulletins, only 2 were expected to increase their revenue, and only 4 were expected to have a positive increase in their net profits attributable to their parent companies. Considering that the net profit growth of Cinda Securities in 2022 will rely more on cost control and fixed income investment, before confirming the trend that the profit of fixed income investment will continue to be better than the market average, we will adjust the total operating revenue forecast of the company from 4.562 billion yuan and 4.830 billion yuan to 4.166 billion yuan and 4.423 billion yuan in 2023-2024, and increase the revenue forecast of 2025 by 4.589 billion yuan, with year-on-year growth of 21.17%, 6.17% 3.75%； Before observing the clear downward trend of administrative expenses, the forecast of net profit attributable to the parent company in 2023-2024 was adjusted from the original 1.503 billion yuan and 1.546 billion yuan to 1.457 billion yuan and 1.514 billion yuan, and the forecast of net profit attributable to the parent company in 2025 was increased by 1.582 billion yuan, with year-on-year growth of 18.72%, 3.91% and 4.51% respectively; From 2023 to 2025, the EPS will be RMB 0.45, RMB 0.47 and RMB 0.49 per share (calculated according to the share capital after issuance) respectively, and the PE corresponding to the latest closing price of RMB 15.54 will be 34.59X, 33.28X and 31.85X respectively. Considering the strength of shareholders and the development potential of the company's characteristic business, as well as the small circulating market value and large flexibility of the secondary new shares, we give Cinda Securities a "shareholding increase" rating.
Risk warning
Compliance and risk control risks during the company's business expansion; The risk that the service rate or commission rate of the company and the securities industry will decline more than expected; In the future, attention should be paid to the lifting of the ban and the reduction of shareholders' holdings.
The company's performance is strongly related to the capital market, and the impact of capital market fluctuations on its profitability; The risk of economic recovery not meeting expectations after the optimization of epidemic prevention and control; The process of domestic liquidity easing was not as expected; The risk of decline in A-share trading activity.
The risk of significant fluctuations in the RMB/US dollar exchange rate, significant changes in the US China interest margin and liquidity impact, and the risk of interest rate fluctuations beyond expectations.
