Guosen: Maintaining the "outperform market" rating on the securities industry, with a focus on recommending CITIC SEC (600030.SH) and others.

Guosen released a research report stating that it maintains an "outperforming the market" rating on the securities industry. Focusing on the two main themes under strict supervision and regulation, the bank believes that industry concentration will further increase, institutional pricing power will deepen, asset management standardization will strengthen, and regulatory requirements will continue to rise. It recommends focusing on leading securities firms CITIC SEC (600030.SH, 06030) and Huatai (601688.SH, 06886). It also suggests paying attention to Industrial (601377.SH) with strong business synergy expectations and Guolian Minsheng (601456.SH) with smooth integration progress. Guosen's main viewpoints are as follows: - Capital expenditure, operating expenses, and compensation and benefits are balanced in securities firms' IT investment. According to data from the Securities Association of China, in 2023, the securities industry's total IT expenditure was 41.541 billion yuan, with capital expenditure of 13.574 billion yuan accounting for 32.68%, operating expenses of 16.081 billion yuan accounting for 38.71%, and compensation and benefits of 11.885 billion yuan accounting for 28.61%. IT expenditure in the securities industry is highly correlated with industry performance. From 2021 to 2023, due to the pressure on revenue growth in the securities industry, IT expenditure slowed significantly, with the year-on-year growth rate of IT expenditure in the industry decreasing from 26.52% in 2021 to 10.00% in 2023. - IT applications in the securities industry have achieved comprehensive coverage, with investment in brokerage business and middle and back-office IT significantly higher than other businesses. IT applications in various aspects such as brokerage business, institutional services, asset management, proprietary investment, investment banking, credit business, compliance risk control, business decisions, and enterprise operation and management have been covered. In terms of capital expenditure in the securities industry, in 2023, the brokerage business accounted for 33.82%, and the middle and back-office accounted for 38.34%, with the two accounting for the majority of capital expenditure. The core business of securities companies is brokerage business, which requires high timeliness, accuracy, and security, making the core trading system and trading equipment essential items for IT expenditure. Additionally, as securities companies grow in size, the complexity of management affairs increases, leading to a rise in IT expenditure in the middle and back-office of the securities industry. - Artificial intelligence has been widely used in various business areas of securities companies, with many application cases in brokerage business, middle and back-office, and investment banking. In 2023, there were 159 artificial intelligence application cases in brokerage business, accounting for 41.51%; 92 cases in the middle and back-office, accounting for 24.02%; and 45 cases in investment banking, accounting for 11.75%. With many securities firms integrating DeepSeek's large model, these firms are expected to apply it in intelligent investment consulting, intelligent customer service, industry research, risk management, intelligent office, and other scenarios, accelerating its application in a wider range of fields and bringing new development opportunities to the securities industry. - Trading volume has rebounded, and margin trading scale has expanded. (1) In terms of brokerage business, the average daily trading volume of A-shares in February was 1.8402 trillion yuan, up by 52.5% month-on-month and 92.2% year-on-year. (2) In terms of investment banking, in February, there was 1 IPO, raising a total of 1.281 billion yuan, down by 98.0% month-on-month; the total amount of refinancing in February was 31.289 billion yuan, down by 96.2% month-on-month; the total amount of corporate bond underwriting in February was 2,144.99 billion yuan, down by 28.88% month-on-month. (3) In terms of proprietary business, the Shanghai Composite Index increased by 0.29%, the CSI 300 Index increased by 1.91%, the ChiNext Index increased by 5.16%, and the ChinaBond Index fell by 1.06%. (4) Looking at margin trading balances, which reflect market risk appetite and activity, as of February 28, the margin trading balance was 1.9 trillion yuan. Risks: Economic recovery falls short of expectations; intensified market competition; innovation progresses less than expected, etc.