Guotai Junan, a listed brokerage firm, looks forward to its performance in 2024: the effects of reforms are evident and performance improves significantly.

Guotai Junan releases research report stating that since September 24, market conditions and trading activity have improved. Growth in investment and brokerage performance is driving overall performance, with a forecasted positive growth rate in the performance of listed securities firms in 2024, with a year-on-year increase in net profit attributable to the parent company of +14.03%. It is expected that in 2025, the overall implementation phase of the new "National Nine Provisions" core "1+N" policy system will begin, encouraging institutional funds to continue entering the market through capital market reforms and innovative financial instruments. It is suggested to increase holdings in securities firms that are expected to enhance their institutional business advantages through mergers and acquisitions. Key points from Guotai Junan: Forecasted positive growth rate in the performance of listed securities firms in 2024, with a year-on-year increase in net profit attributable to the parent company of +14.03% 1) It is forecasted that the adjusted operating income (operating income - other operating costs) of 43 listed securities firms in 2024 will increase by +7.18% year-on-year to 438.375 billion yuan, with net profit attributable to the parent company increasing by +14.03% year-on-year to 146.63 billion yuan. 2) In 2024 Q4, boosted by the stock market and the low base in Q4 of 2023, there will be a significant improvement in quarter-on-quarter/year-on-year performance, with adjusted quarterly revenue of 138.817 billion yuan, a quarter-on-quarter/year-on-year increase of +27.74%/+54.41%, and net profit of 43.181 billion yuan, a quarter-on-quarter/year-on-year increase of +9.35%/+131.95%. Market conditions and trading activity have improved since September 24, driving growth in investment and brokerage performance and overall performance 1) Looking at the contribution of various business revenues of listed securities firms in 2024 to the increase in operating income, it is expected that investment business will contribute the most with 160.15%, primarily due to significant improvements in the stock and bond markets compared to 2023. At the same time, the year-on-year growth in brokerage business will contribute 36.11% to the increase in operating income, mainly due to the significant improvement in market trading volume in Q4. 2) It is forecasted that investment business revenue in 2024 will increase by +32.70% year-on-year to 190.881 billion yuan, while brokerage business revenue will increase by +10.54% year-on-year to 111.231 billion yuan. In addition, it is expected that investment banking business revenue in 2024 will decrease by -30.8% year-on-year to 31.543 billion yuan, primarily due to the pressure on equity investment banking business, but showing marginal improvement. Asset management business revenue in 2024 is expected to decrease by -2.46% year-on-year to 45.026 billion yuan, mainly due to the reduction in management fees. Net interest income in 2024 is expected to decrease by -9.21% year-on-year to 39.703 billion yuan, mainly due to pressure on margin trading business and rigid interest-bearing liabilities. Capital market reforms and promotion of innovative financial instruments, encouraging continued entry of institutional funds into the market It is expected that in 2025, the overall implementation phase of the new "National Nine Provisions" core "1+N" policy system will begin. With the effectiveness of the policies, it is expected that the quality of listed companies will improve, enhancing the willingness of investors to allocate assets. Policies promoting the entry of institutional funds into the market, including the SFISF, are expected to continue to advance, guiding institutional funds to continue entering the market. On December 31, 2024, the People's Bank of China announced that the second SFISF operation would soon be launched with an operation amount of 55 billion yuan. Suggested to increase holdings in securities firms that are expected to enhance their institutional business advantages through mergers and acquisitions Head securities firms with stronger comprehensive service capabilities have a competitive advantage in institutional business, with the growth in institutional business expected to lead the industry. It is recommended to increase holdings in securities firms that are expected to enhance their institutional business advantages through mergers and acquisitions, specifically recommending China Galaxy (06881, 601881.SH) and CITIC SEC (06030, 600030.SH). Risk Warning: Significant fluctuations in the equity market.