Guotai Haitong: Recommends leading securities firms with stronger advantages across the full business chain, greater growth potential in technology innovation investments, and enhanced sustainability.

Guotai Haitong released a research report recommending top-tier securities firms that possess a stronger advantage across the entire business chain, with greater growth potential and sustainability in technology innovation investments. In the short term, the significant floating profits primarily reflect cyclical factors; however, from a medium to long-term perspective, top-tier brokers that have validated their project acquisition capabilities through a closed loop of "investment investment banking exit" possess revaluation potential in their technology investment businesses. Guotai Haitong's main viewpoints are as follows: Since the second half of 2025, the dual innovation sectors IPOs have gradually warmed up, with securities firms' earlier investments in primary market technology projects entering a realization window, creating floating profits on the scale of hundreds of billions. This report seeks to answer two questions of market concern: 1. After the IPO of certain key projects, how much profit elasticity can be released in the short term, and what is the pace of realization? 2. In the medium to long term, do securities firms' technology innovation investments lean more toward cyclical or growth potential? Perspective One: In the short term, the elasticity that pending IPO projects can release is estimated to only correspond to 5% of annual profits, and mainly benefits a few specific brokers. 1) Industry Level: Excluding projects that are already listed, such as CXMT Corporation, the estimated after-tax floating profit of the subsequent IPO projects that brokers invested in corresponds to only 5% of the industrys annual net profit, indicating "profit enhancement" rather than "profit reconstruction." 2) Company Level: Floating profits are concentrated in top projects and leading brokers, rather than being broadly available across the industry: for small and medium-sized brokers, the realization of a single project can leverage double-digit elasticity; for top brokers, floating profits more reflect the strategic value of investment bank synergy and project positioning, leading to smoother and more sustainable performance realization. Perspective Two: In the medium to long term, the growth potential of securities firms technology innovation investments remains to be tested over time. It should be understood that the current floating profit realization is a product of three overlapping cyclical dividends: cost advantage, systematic valuation uplift, and issuance scarcity premium. These three factors may be difficult to replicate in new investments. 1) Yield faces the pressure of mean reversion; the average return on the first day for newly listed companies in the dual innovation board in 2026 was 418%, significantly higher than 269% and 235% in 2024 and 2025, respectively, and far above the double-digit yields of 2022-2023; 2) Only a few brokers have the capability to continuously invest in good projects, either relying on business chain synergy from the three-investment linkage or leveraging self-built fund platform channels from certain geographical advantages. Perspective Three: From overseas cases, Goldman Sachs proprietary private equity investments reflect more cyclical characteristics, demonstrating significant profit volatility, while simultaneously compressing balance sheet exposure and shifting toward an off-balance-sheet fee-based model. Historical analysis shows that Goldman Sachs private equity net income can contribute nearly 30% of net profits during bull markets, but plummets by over 90% during tightening periods, showcasing strong beta attributes; over the past decade, Goldman Sachs reduced its on-balance-sheet private equity size by 94% and fully shifted to off-balance-sheet asset management; domestic brokers' alternative business scales continue to expand, but profit stability is hard to maintain. Top-tier brokers, like Goldman Sachs, are also actively reducing their scale, while private equity subsidiary scales have not seen significant expansion. Risk Warning: The IPO timeline may be slower than expected; significant fluctuations in the capital market; progress of key projects going public may not meet expectations; risks of discrepancies between modeling calculations and actual conditions.