BOCOM INTL: It is expected that the profit in the third quarter will maintain a high growth rate. The valuation of the securities sector is attractive.

BOCOM INTL releases research report maintaining a leading rating for the securities industry. The bank believes that the securities sector currently has a high investment value ratio, and expects that the short-term market sentiment volatility will provide investment opportunities. Top securities firms will fully benefit from the favorable market environment, with the bank maintaining buy ratings for CITIC SEC (06030), Huatai (06886), and CICC (03908). The bank expects a 20% quarter-on-quarter profit growth for listed securities firms in the third quarter, with a year-on-year growth rate expected to remain above 50%. In the first half of the year, listed securities firms saw a 51.5% year-on-year profit growth (Guotai Haitong's net profit after adjustments), with a 53% and 50% year-on-year growth in the first and second quarters respectively. The bank expects a 20% quarter-on-quarter profit growth in the third quarter, with a 51% year-on-year growth, resulting in an overall profit growth of about 51% in the first three quarters. The bank expects brokerage business income to further improve from the low base in the first half of the year. The average daily trading volume of A-shares in the first three quarters was 1.62 trillion Chinese yuan, a year-on-year increase of 104.6%, up by 45.8 percentage points from the first half of the year, with a 68.7% and 48.9% year-on-year growth in the first and second quarters respectively. In the third quarter, on a low base, there was a 208.8% year-on-year growth. The report states that the year-on-year growth rate of IPO fundraising has significantly increased compared to the first half of the year. The IPO fundraising amount for A-shares in the first three quarters was 77.3 billion yuan, a 62% increase year-on-year (compared to a 15% increase in the first half of the year); the total equity fundraising amount was 896.2 billion yuan (including 520 billion yuan from the targeted issuance financing of 4 state-owned large banks in June), a 3.4 times increase year-on-year. Excluding the targeted issuance by state-owned large banks, the fundraising amount was 376.2 billion yuan, an 84% year-on-year increase. In terms of A-share IPO underwriting amount ranking, Zhongjin, Guotai Haitong, and Huatai were the top three; in terms of Hong Kong IPO underwriting amount ranking, Zhongjin was significantly ahead of its peers. The bank points out that the significant increase in the A-share market in the third quarter is expected to lead to a high year-on-year increase in proprietary investment income, which remains the main driving factor for the profit growth in the securities industry. Looking at the market index performance, the overall performance in the first half of the year was relatively stable, with a significant increase in the third quarter. The Shanghai and Shenzhen 300 Index rose by 17.9% in the first three quarters, similar to the same period last year, but the performance of small and medium-sized index was significantly better than the same period last year, especially with the ChiNext and STAR 50 Indexes with a growth rate of over 50%. In terms of valuation, the price-to-book ratio of the A-share securities industry index is 1.45 times, which is at the 44th percentile in the historical data of the past 10 years, still lower than the median of 1.51 times. The bank believes that the valuation of the securities sector is currently at a relatively low level, while the profit in the third quarter is expected to remain at a high level, supporting a further increase in valuation.