<News alert> CITIC Securities (6030 HK, BUY) – 4Q23 preliminary results below expectations
- 4Q23 net profit was down 31% y-o-y to Rmb3.3b, below consensus forecast of Rmb5.1b, likely dragged by IPO slowdown and lower investment return in our view
- We expect some share price pressure in near-term, as the result might not fully meet investors’ expectations, given its outperformance compared to peers and HSI since Oct2023
- However, we think it will continue to outperform peers in 2024 due to its stronger business diversification; maintain BUY with TP under review
Both revenue and profit missed expectations. CITICS’ 4Q23 net revenue was down 7% to Rmb14.2b, below consensus of Rmb17.0b. Net profit was down 31% to Rmb3.3b, below consensus of Rmb5.1b. On a full-year basis, FY23 net profit was down 7.7% y-o-y to Rmb19.7b, reaching 92% of consensus. FY23 ROE declined by 87bps to 7.8%. We believe the miss was mainly attributable to the tightening of A-share IPO and weaker equity investment performance. A-share IPO fundraising volume plunged by 68% y-o-y while CSI 300 index was down by 7% during 4Q23.
Expect near-term share price pressure. We think the market has moved ahead and largely priced in China brokers’ weaker 4Q23 results in general, as the share prices of China brokers under our coverage were down by an average of 15% during 4Q23. Notably, CITICS’ share price only -2%, outperforming most peers and HSI’s -14%. We expect some share price pressure in near-term, as the degree of earnings resilience might not fully meet investors’ expectations. However, we believe that CITICS, as the most well-capitalised and diversified player, is well positioned to outperform peers and better withstand the challenging market condition in 2024. Maintain BUY with TP under review.