Northeast Securities (000686) 2018 Annual Report and 2019 First Quarterly Report Comment: Self-driven profit conversion has low valuation and high elasticity

Northeast Securities (000686) 2018 Annual Report and 2019 First Quarterly Report Comment: Self-driven profit conversion has low valuation and high elasticity

Event: In 2018, the company achieved operating income of 67.

800 million (YoY + 38%), net profit attributable to mother 3.

0 billion (YoY-57%); the company achieved operating income in the first quarter of 201922.

800 million (杭州夜网论坛 YoY + 141%), net profit attributable to mother 5.

700 million (YoY + 307%).

The reason for the rapid divergence of the company’s revenue and profit growth in 2018 was that the spot trading business income of futures subsidiaries with low profit margins increased significantly.

We believe that the company’s investment highlights are: (1) the self-operated business has driven the performance to rebound rapidly, the company’s self-operated revenue growth in 2019Q1 increased by 370%, and the flexibility advantage is obvious; (2) the current valuation at the end of 2018 is as low as 1.

3xPB is still attractive.

Self-employment: Expand the scale of self-employment and grasp the stock market.

The company’s self-operated income in 2018 was 15.

700 million (YoY + 5%), performing better than the industry (-35%), mainly due to the strengthening of fixed income investment to grasp the trend of bond market in 2018, the company’s self-operated fixed income assets / net capital rose by 83% at the end of 2018To 90%, the total annualized return on investment reached 6.


While strengthening solid income investment, the company increased its stock holdings at the bottom of the market in the second half of 2018, and equity assets / net capital rose from 23% in 2018H to 25 at the end of the year.

2%, grasped the rise of the stock market in 2019Q1.

2019Q1 company self-operated income10.

6 trillion, accounting for 70% of the company’s revenue (excluding other income), alternating and sequential growth of 370% and 38%, of which net income from changes in fair value increased significantly by 953%.

We believe that the company’s self-employed influence on performance has stronger performance flexibility than its peers in the stock market rebound cycle.

Brokers: Maintaining regional advantages and increasing performance.

In 2018, the company’s brokerage business income reached 6.

8 ‰, a year-on-year decline of 10%, but in the context of the market downturn, the decline in the industry level.

In Q1 2019, the company’s single-quarter brokerage business income reached 2.

3.4 billion, an increase of 67% from the fourth quarter, and an annual increase of 28%.

The company takes Jilin Province as the center and forms a regional advantage in the Northeast. Until the end of 2018, the company’s operating outlets in Jilin Province accounted for over 30%.

In 2018, the country’s stock-based trading volume market share restructuring 0.

8%, a slight decrease before 2017.

Credit transactions: The two financial markets gradually recovered, and asset impairment expectations were reversed.

The company’s 2019Q1 interest rate net income was -0.

400 million US dollars, a year ago from surplus to loss, in fact, the contraction of the stock pledged repo business and the expansion of the two integrations led to a reduction in credit business income and income, while the bond repurchase business income expenses increased.

Marginally, reducing the continuous recovery of the two financial services will bring incremental performance, although although the company’s asset impairment losses will reach 6 in 2018.

800 million (YoY + 195%), dragging down overall performance, but the conversion market is picking up, and the company’s partial impairment is expected to be washed back.

Investment bank: Investment bank looks forward to marginal improvement.

Revenue of the company’s investment banking business in 20182.

300 million, a year-on-year decrease of 29% (industry-27%).

In the first quarter of 2019, the company did not implement the equity underwriting business, which caused the investment bank income to continue to decline by 29% (industry + 8%). According to WIND statistics, the company has pre-released 9 update projects as of May 9, and the equity financing business remainsThere is room for improvement.
With the overall scale of bond underwriting expanding, the company’s bond underwriting scale in the first quarter of 2019 increased by 77% from the previous quarter, and investment bank revenue is expected to usher in marginal improvement.

Asset management: The scale of the entrusted assets continued to decline, and the pressure of transformation was prominent.

Net asset management income of the company in 20181.

700 million (YoY-19%), lower than the industry level (-4%).2019Q1 Net income of asset management is 0.

2.4 billion (YoY-40%), far below the industry level (-8%).

The sluggish asset management performance of the company in 2018 was mainly due to the sharp decline in asset management scale (YoY-44%) and reduction in management fees caused by the tightening of industry supervision.

The new rules of asset management forced the brokers to reduce channel business, and in the context of transition to active management, the company ‘s asset management subsidiary, TOP Securities Ronghui, actively scaled up its management year by year, and newly issued 17 杭州桑拿网collective asset management plans.

It is expected that the company’s active management scale will continue to expand and accelerate the transformation of asset management business.

Investment advice: Buy-A investment rating.

The company’s EPS for 2019-2021 is expected to be 0.

67 yuan / 0.

75 yuan / 0.

78 yuan to the company 1.

4xPB estimate, corresponding to a target price of 10.

96 yuan.

Risk reminder: investment risk / significant contraction risk / policy risk