Founder: Supply-side reform accelerating in the securities industry, suggests focusing on strengthening and optimizing top brokerage firms.

Founder released a research report stating that the capital market continues to be highly prosperous, the reform of the supply side of the securities industry is accelerating, and the current improvement trend of the fundamental side of securities firms is deviating from their valuation performance, emphasizing seizing opportunities. It is optimistic about the profitability of the securities sector in 2025 under the high prosperity of the market, with the valuation and performance improvement trends of the sector not matching, and there is sufficient room for valuation upgrades; in terms of PB valuation, the sector's dynamic PB for 2025 is 1.35 times, ranking in the 36th percentile of the past 10 years, which is not at historical highs. The bank believes that this round of securities merger cases is expected to accelerate the industry's supply-side reform and drive the valuation recovery of the sector. It is expected that the net profit of the securities sector in 2025 will increase by 51% year-on-year, with ROE rising to 8.8%. The report recommends focusing on the leading securities firms that are becoming stronger and more competitive. Event: On November 19th, CICC, Cinda, and Dongxing all announced the planning of major asset restructuring matters and suspended trading from November 20th. CICC plans to merge with Cinda and Dongxing through an absorption and stock exchange method, with the expected suspension duration not exceeding 25 trading days. Key points of Founder's analysis: -The integration of securities licenses within the China Investment Corporation (CIC) is initiated, promoting supply-side reform in the securities industry. -CICC's overall strength ranks among the top 10 in the industry, and this absorption merger will help CICC's capital strength leap to the fourth in the industry, accelerating its progress towards becoming an international first-class investment bank. -CICC's brokerage and asset management business strengths are expected to be strengthened, with potential license integration among subsidiaries. -The possibility and necessity of strategic restructuring among other leading securities firms in the industry as part of supply-side reform are increasing. Risk warning: Mergers progress slower than expected; policy implementation lags behind; residents' asset allocation migration falls short of expectations.