CITIC Securities (600030)

Event description

    CITIC Securities released its 2020 annual report. During the reporting period, the operating revenue and attributable net profit were 54.383 billion yuan and 14.902 billion yuan, respectively,+26.1% and+21.9% year on year; The weighted average ROE increased by 0.67 pct to 8.4% year on year.

    Event comments

    The charge business has become the driving force of profit growth, and the pressure of impairment has led to the weaker growth of profit than income. In 2020, the company realized revenue of charge and capital business of 26.764 billion yuan and 21.079 billion yuan,+48.5% and+12.5% year on year, of which the revenue of capital business in the fourth quarter dropped to 3.059 billion yuan; Management expenses increased slightly by+14.7% year on year to RMB20.145 billion, and credit impairment losses increased by+247.9% year on year to RMB6.581 billion, which constrained profit performance. Among them, the impairment scale of resale purchase, financing and other debt investments reached RMB4.879 billion, 711 billion and 555 million, respectively, and the provision ratio for pledge rose to 25.3%.

    The charging business has blossomed in many places, and the transformation of wealth management has achieved remarkable results. The revenues from brokerage, investment banking and asset management businesses were 112.57 billion yuan, 6.882 billion yuan and 8.006 billion yuan, with year-on-year growth rates of 51.6%, 54.1% and 40.3% respectively; Among them, the wealth management transformation effect of brokerage business was remarkable, with the revenue from financial product sales on a year-on-year basis increasing by 144.5% to 1.965 billion yuan, the scale of financial product sales on a commission basis was 944.7 billion yuan, and the scale of public offering and private ownership exceeded 300 billion yuan; Investment banks benefited from the growth of both issuance scale and number, with shares of stocks and bonds reaching 18.94% and 12.93%; The management fee income of CITIC Asset Management and Huaxia Fund respectively increased by+51.6% and+35.7% to 2.474 billion yuan and 5.532 billion yuan, the active AUM of CITIC Asset Management increased by+50.7% to 1.05 trillion yuan, and the AUM of Huaxia increased by+41.6% to 1.46 trillion yuan.

    The position of financial assets continued to expand, and the securities lending business performed well. Net interest income increased by+26.5% year on year to 2.587 billion yuan. Thanks to the growth of financing business and customer fund deposit interest, the securities lending business shines brilliantly. The balance increased by 14 times year on year to 32.841 billion yuan, corresponding to a market share of 24.0%. On balance sheet pledge increased by - 21.6% year on year to 31.724 billion yuan. Impairment provision consolidated asset quality; Investment business income increased by+10.8% year-on-year to 18.492 billion yuan, and financial assets increased by+22.9% year-on-year to 486.017 billion yuan, of which trading stock assets increased by 139.4% year-on-year to 148.837 billion yuan. It is expected that non directional business dominated by over-the-counter options and income swaps is the main direction of equity asset expansion.

    We are optimistic about the growth of CITIC Securities in the capital market reform cycle. On the one hand, a good customer structure and a comprehensive collectivization layout give the company stability in its profits; on the other hand, excellent innovative business capabilities give the company growth in its profits. The reform of the issuance and trading system will breed more business opportunities, and CITIC Securities is expected to realize its own growth. It is estimated that the net profit attributable to the company from 2021-2022 will be 18.672 billion yuan and 22.513 billion yuan respectively, corresponding to 16.6 and 13.8 times of PE and 1.55 and 1.39 times of PB respectively, and the company will be given a buy rating.

    Risk warning

    1. The transaction scale and commission rate declined significantly;

    2. There is credit risk in stock pledge and bond investment.