Guotai Haitong: Retail and self-operated business drive securities performance to a high annual growth Recommend Huatai (601688.SH) and CICC (03908).

Guotai Haitong released a research report stating that the wealth effect brought by long-term funds entering the market will continue to drive resident funds into the market, and the performance of securities firms is expected to gradually release under the drive of retail and other businesses. The bank continues to be optimistic about the securities sector market driven by the dual forces of configuration power (including resident funds entering the market) and performance improvement. The sector benefits from the resonance of configuration power and performance elasticity, and is more optimistic about high-quality leading and wealth management characteristic targets. It is recommended to increase holdings of high-quality leading securities firms benefiting from incremental funds entering the market, and recommend Huatai (601688.SH) and CICC (03908). The bank expects that with trading activity combined with base effect, the performance of listed securities firms will significantly improve, with a year-on-year increase in net profit of +46.4%. The bank expects the adjusted operating income (operating income - other operating costs) of 42 listed securities firms to increase by 34.1% to 565.7 billion yuan in 2025, and the net profit attributable to shareholders to increase by 46.4% to 216.4 billion yuan, with a single-quarter profit of 47.3 billion yuan in Q4, a year-on-year increase of +8%/quarter-on-quarter decrease of -27%. The report states that active trading activity drives market turnover and margin trading balance, leading to high growth in retail business, combined with the recovery of proprietary trading business, which is the main support for the growth of securities firms' performance. In terms of the contribution of various business incomes of listed securities firms in 2025 to revenue growth increment, the bank expects brokerage and credit business to contribute 50.4%, and investment business to contribute 45.5%. 1) In terms of retail business, the average daily turnover of stock funds reached 20.576 trillion yuan for the whole year, a year-on-year increase of 70%, and the average daily margin trading balance reached 20.793 trillion yuan, a year-on-year increase of 33%. The bank expects brokerage net income and interest net income to increase by 49% and 57% respectively year-on-year; 2) In terms of proprietary trading business, benefiting from the boost of the equity market and the relative stability of the bond market, the bank predicts that the proprietary income rate will continue to recover, driving the growth of annual proprietary income; 3) The bank expects investment banking business income to increase by +12% year-on-year, as the marginal warming of equity financing boosts investment banking profitability; 4) It is expected that the scale of asset management business will increase slightly year-on-year, driving asset management income to increase by +4%.