Goldman Sachs: CITIC SEC (06030) posted strong second-quarter earnings driven by investment gains, with the target price raised to HKD 33.51.

Goldman Sachs released a research report stating that it has raised the target price for CITIC SEC (06030) from HKD 33.46 to HKD 33.51, and for its A-shares (600030.SH) from RMB 44.64 to RMB 44.72. The company's revenue and net profit for the second quarter were RMB 26.5 billion and RMB 13.4 billion, respectively, representing year-on-year growth of 74% and 82%, which is roughly in line with preliminary performance. During the period, brokerage commission income was RMB 4.9 billion, investment banking income was RMB 1.8 billion, asset management income was RMB 3.7 billion, and investment income was RMB 15.5 billion, 19% higher than the bank's expectations. Net interest income was RMB 700 million, with a cost-to-income ratio of 35.3%, slightly above the bank's expected 34%. The annualized return on equity for the second quarter was 15.3%, an increase of 6 percentage points year-on-year and a quarter-on-quarter increase of 2.8%, which is roughly in line with expectations. The active leverage ratio was 5.1 times. Overall, Goldman Sachs believes that this performance aligns with its recent viewpoint on the industry, indicating that Chinese securities firms will continue to benefit from strong capital market activities, record-high average daily trading volumes in A-shares, a heated IPO financing market in Hong Kong, and improved capital efficiency. At the same time, the bank maintains its original view that the medium-term earnings and valuation upside will increasingly rely on enhancements in return on equity (ROE) brought about by balance sheet expansion and international capital deployment, rather than solely on cyclical market trading activity.