Comments on major issues of Founder Securities (601901): Founder sold Credit Suisse: gain investment income and reduce profits of subsidiaries
matter:
Founder Securities announced that it planned to sell 49% equity of Credit Suisse Securities held by the company to Beijing State owned Assets at a price of RMB 890 million, which is expected to bring net investment income of RMB 370 million.
Comments:
It is estimated that the investment income will be 370 million yuan (16.4% of the net profit in 2023). By the end of 2023, the book value of Credit Suisse Securities in the Founder's statement is 520 million yuan. The sale is expected to obtain an investment income of 370 million yuan, which is expected to increase the company's investment income and gain ROE growth in the current period.
Reduce the drag of subsidiaries on the company's profits and focus on the main business operation. Affected by the continuous losses of Credit Suisse Securities, the Company accrued net investment losses of - 0.9 billion yuan to 140 million yuan in 2022 and 2023, which caused a long-term drag on the Company's profits. The company's sale of Credit Suisse Securities will help improve long-term earnings.
The sale price is lower than the transaction in September 2022, which is expected. In September 2022, the company announced that it planned to sell the equity of Credit Suisse Securities held by the company to Credit Suisse Bank. However, affected by the restructuring of overseas Credit Suisse in recent years, the declining prosperity of the securities market and the increasing pressure on the operation of Credit Suisse Securities, the sale price was lower than the previously announced price, which was expected, and the change in the sale price was lower than the change in the net assets of the subject matter of the transaction, and the transaction terms were also more ideal.
Investment suggestion: continue to be optimistic about the company's leverage increase expectation in the year, and optimistic about the leverage growth of the company's ROE when the market prosperity recovers × the excess growth of ROE caused by the ROA increase. It is expected that the EPS of the company in 2024/2025/2026 will be 0.31/0.35/0.39 yuan, BPS will be 5.78/6.11/6.48 yuan, the corresponding PB of the current stock price will be 1.39/1.32/1.24 times, and ROE will be 5.49%/5.81%/6.13% respectively. The company will be given a valuation of 1.6 times PB in 2024, corresponding to a target price of 9.3 yuan, and maintain the "recommended" rating.
Risk tip: there is uncertainty about whether the transaction can be approved or recorded by the competent authority, risk of shareholder change, increasing downward pressure on the economy, and reduction of capital holdings in Beijing.
