<Result first take>Guotai Junan (2611 HK, BUY) FY21 results ahead with net profits up 29% y-o-y
What’s new:
- Guotai Junan Securities (2611 HK, BUY) announced FY21 result which posted net profits of Rmb15.0bn, up 29% y-o-y, representing 115%/108% of our/consensus FY21F earnings estimate.
Our views:
- The earnings ahead was primarily due to the strong performance of bulk commodity trading business, which achieved a 61% increase y-o-y in revenue given the rise of commodity prices.
- The rather strong market sentiment in FY21 drove fee and commission income up 38% yoy to Rmb19.9bn in FY21. Brokerage fee income and Underwriting fee income up 22% and 10% y-o-y to Rmb13.5bn and Rmb4.0bn respectively, accounted for 68% and 20% of total fee income.
- Investment banking business saw a 17% y-o-y growth in terms of lead underwriting amount in FY21, implying the company seized the opportunities presented in the registration-based listing system reform. In FY21, the company led underwriting of 25 IPOs (22 in FY20), 47 SPOs (41 in FY20), and 1814 bond issuances (1935 in FY20), with total underwriting amount of Rmb942.4bn.
- Interest income reached Rmb15.8bn in FY21, up 15% y-o-y, driven by the substantial growth of interest income from margin financing, which recorded a 20% y-o-y growth due to higher market sentiment.
- Investment income achieved a 10% y-o-y growth to Rmb10.3bn, driven by the gain of dividend income from equity investment under relatively high market sentiment in FY21.
- Risk control indices remain prudent with risk coverage ratio, liquidity ratio and capital leverage ratio stand at 190%, 248%, and 20%, much better than benchmarks. Overall recovery in earnings drive ROE to reach 10% in FY21, 2ppt higher than in FY20.
- Maintain BUY with TP of HK$14, implying 0.7x FY22F P/BV.
