: Securities reform deepens transformation continues, long-term industry value reshaping can be expected.

Wanlian Securities released a research report stating that in the short term, the previous valuation suppression factors have weakened marginally, and the securities sector valuation still deviates deeply from fundamentals, with potential for repair. In the long term, international business and underwriting co-investment activate growth attributes, and the reshaping of securities industry value can be expected. The bank believes that international business and investment banking capitalization have become key support points for raising the central ROE under the industry's heavy capital operation mode. Meanwhile, the transformation of traditional brokerage business into wealth management will help brokerage firms cope with the long-term pressure of declining commission rates, create incremental value, optimize their proprietary asset structure, and reduce reliance on market trends, smoothing out cyclical fluctuations in performance. Overall, the securities industry is expected not only to see valuation repair, but also has growth value reshaping potential in the long run. The main points of Wanlian Securities are as follows: Review of 2026Q1 performance: year-on-year high growth, wealth management and investment are core drivers 1) In the first quarter of 2026, a total of 43 listed securities firms achieved adjusted operating income (operating income - other operating costs) of 150.7 billion yuan, a year-on-year increase of 31%, with a net profit attributable to the parent company of 60.8 billion yuan, a year-on-year increase of 39% (excluding the 8.5 billion yuan negative goodwill generated by the merger of Guotai Haitong in Q1 2025). The performance of leading securities firms was generally good, with differentiation among medium and small securities firms, and some institutions showing higher elasticity due to their small base. 2) Brokerage, credit, and investment business are the core sources of revenue growth. All 43 listed securities firms saw growth in brokerage business revenue, contributing 41% of the overall revenue growth of listed securities firms; credit business revenue contributed 20% of the revenue growth; investment business revenue contributed 19% of the revenue growth despite a decrease in revenue contribution due to market fluctuations, with differentiation in performance among securities firms of different sizes, with most leading securities firms achieving positive growth. 3) Industry operating leverage and concentration continued to rise, with significant advantages for leading securities firms. Continuous improvement of the technology and finance system, accelerating the reshaping of the securities industry landscape 1) The "15th Five-Year Plan" has laid out the future five-year capital market reform roadmap, with a series of investment and financing reform measures introduced since the beginning of the year and the acceleration of the construction of the technology and financial system. 2) M&A activity continues to heat up, with central Huijin and local state assets advancing in parallel, accelerating the reshaping of the industry landscape, while refinancing opportunities are on the rise, with leading securities firms and regional securities firms focusing on international business and investment business. Industry outlook: strong fundamentals, positive development of all businesses 1) Broad wealth management business: the development of quantitative private equity, expansion of quality growth targets may further boost stock-based turnover, with large securities firms benefiting more; margin trading balance continues to rise, credit business revenue is expected to continue to increase; public fund size reaches a new high, securities brokerage asset management scale stabilizes with a slight increase, resident savings and long-term funds entering the market at the right time, prospects for the development of wealth management business are promising. 2) Investment banking business: reforms on the financing side catalyze business recovery, investment banking co-investment will promote securities firms to transform from traditional intermediaries to "value discoverers" and "industrial partners", building a leading advantage for top securities firms through project reserves + capital strength. 3) Investment business: a positive stock and bond market provides a good environment for business growth, with self-operated equity OCI, fixed-income trading platforms, alternative subsidiaries, and private equity subsidiaries expected to bring higher profit flexibility. 4) International layout: the industry is accelerating its international layout, with the top four leading significantly, the ROE of most international subsidiaries of the top ten securities firms is higher than that of the parent companies as a whole, serving as an important lever to enhance profitability. Market and valuation analysis: Valuation is significantly deviated from performance, with a high safety margin. Risk factors: Major changes in monetary policy, international relations, geopolitical events, etc.; market volatility; macroeconomic performance falling short of expectations; delays in the implementation of capital market reform policies; investment risks in international subsidiaries.