CSC Financial: Brokerage firms' third-quarter profits under short-term pressure, full-year fundamentals unchanged

CSC Research Report states that the quarter-on-quarter decline in third-quarter earnings of listed brokerages stemmed from market pullback and a high base in proprietary trading, while the solid growth foundation in the first three quarters remained unchanged. The 42 listed brokerages recorded revenue growth of +18.7% year-on-year and net profit attributable to parent of +23.8% in the first three quarters, with brokerage, interest, investment banking, and asset management all maintaining growth of over 20%, and profit growth outpacing revenue growth. In the third quarter alone, net profit attributable to parent fell -16.9% year-on-year, of which net income from proprietary investment dropped from a high base of RMB 74.5 billion in the same period last year to RMB 34.9 billion, the main drag; brokerage slipped only slightly, while investment banking and asset management still grew at double-digit rates, showing ample resilience in light-capital businesses. Currently, the PB of leading brokerages is generally around 1x, at a low level in recent years. Three types of targets merit attention: counter-cyclical brokerages with low proprietary exposure and high proportions of brokerage and margin financing, leading brokerages with concentrated investment banking and asset management share, and brokerages whose direct investment and co-investment projects are entering the realization period. It should be noted that if the central level of turnover continues to shift downward, quarterly volatility will still recur.