Overview of Kaiyuan Securities' Listed Brokerage Firms' 2026 Mid-Year Report: Profit Structure is More Important than Growth Rate, Three Major Narratives Support the Revaluation of Top Brokerages

According to a research report released by Kaiyuan Securities, in the first half of 2026, the adjusted revenue and net profit attributable to shareholders, excluding non-recurring gains and losses, for 39 listed brokerage firms are projected to be 356.2 billion yuan and 151.5 billion yuan, respectively, representing year-on-year growth of 47% and 64%. Leading brokerage firms are expected to see a year-on-year increase of 74% in net profit excluding non-recurring gains and losses, with an average annualized weighted ROE of 13.7%, leading in both growth rate and profitability. The high growth in profits for leading brokerages in this cycle is attributed to both the recovery of market conditions and the growth potential of large wealth management, international business, and the investment banking services related to technological innovation. Compared to the current growth rates, the firm places greater importance on the sustainability of profits driven by AUM-related fees and the growth of client-driven businesses, while also noting the impact of returns from tech innovation investments on quarterly profits. Kaiyuan Securities' main views are as follows: The profit structure is more important than the growth rate, with three narratives supporting the revaluation of leading brokerages. The high growth in profits for leading brokerages this time not only benefits from the recovery of market conditions but also reflects the growth potential in large wealth management, international business, and investment banking for technological innovation. The accumulation of product AUM leads to sustained fees; the expansion of overseas client-driven businesses drives growth in scale and profits; financing and listings of tech innovation projects contribute to underwriting income and investment returns. Compared to the current growth rates, the firm focuses more on the sustainability of profits brought about by AUM-related fees and client-driven business growth, while also considering the impact of tech innovation investment returns on quarterly profits. Leading brokerages are deeply integrated into three main business lines; advantages in acquiring clients and projects are expected to further market share. Coupled with improved capital allocation efficiency and ongoing dividends, an optimistic view is held for the valuation recovery brought about by an upward shift in the ROE center. Recommendations include CITIC SEC, GF SEC, Huatai, CICCH, and Guotai Haitong. Among them, CITIC, Huatai, GF, and CICCH have more diverse sources of growth, with relatively stronger profit sustainability; Guotai Haitong combines both integration potential and flexibility in tech innovation investments. High profit growth in interim reports, with strong performance from distribution and overseas businesses, magnifies profit elasticity from tech innovation investments. In the first half of 2026, adjusted revenue and net profit attributable to shareholders for 39 listed brokerage firms are projected to be 356.2 billion yuan and 151.5 billion yuan, respectively, representing year-on-year growth of 47% and 64%. Leading brokerages are expected to see a year-on-year increase of 74% in net profit excluding non-recurring gains and losses, with an average annualized weighted ROE of 13.7%, leading in both growth rate and profitability. By business segment, distribution revenue is expected to rise by 85% year on year, as earlier accumulated assets gradually contribute to revenue, with continued expansion of product retention and buy-side advisory scale; overseas income is expected to increase by 70% year on year, with the development of client-driven businesses and balance sheet expansion driving profit growth; the recovery of domestic and overseas IPOs is expected to boost investment banking net income by 25% year on year, with leading brokerages growing by 41%, significantly outperforming small and medium-sized brokerages, which are projected to decline by 1%. Direct investment in tech innovation significantly increases the profit elasticity of most brokerages, with high profit contributions from venture, Guotai Haitong's private equity and alternative subsidiaries, while Huatai, GF, and CICCH have relatively low ratios and small year-on-year changes, indicating a limited dependency on profit growth from such returns. The optimization of business structure, an increase in leading market share, and improvements in capital returns form the three main narratives for investing in brokerages. (1) A slow bull market environment is favorable for settling client assets, with demand for wealth allocation by residents, cross-border financing for enterprises, and the growth needs of tech innovation companies driving the transformation of three main businesses. The growth in fee income from existing wealth management and overseas client-driven income enhances profit sustainability, while the accumulation of tech innovation projects contributes to underwriting, management, and investment opportunities. (2) Cross-border, off-exchange derivatives, and integrated investment banking businesses have higher requirements for qualifications, capital, client networks, and professional capabilities. Long-term investment by leading brokerages has created competitive barriers, which are expected to concentrate incremental business in leading firms and transform it into profit advantages through economies of scale and integrated services. (3) Compared to large-scale placements in the past, some brokerages this time support overseas and cross-border businesses through H-share financing, with clearer capital allocations; cash dividends for listed brokerages are expected to increase by 45% year on year, maintaining overall stability in annual dividend policies. The combination of prudent financing, improved capital allocation efficiency, and ongoing dividends is conducive to fully transforming profit growth into earnings per share and cash returns for shareholders. Risk warnings: risks from market volatility and decreased trading activity; risks of the recovery in investment banking business and tech innovation investment returns falling short of expectations; risks from wealth management transformation and growth in asset management business not meeting expectations; changes in regulation affecting cross-border and derivatives businesses.