GF SEC: Revaluation of Securities Firms' Value Under the Technology Wave and the Three-Investment Synergy

GF SEC released a research report stating that AI-driven expansion of hard-tech project supply, combined with the entry of long-term capital and improvement in diversified exit channels, has brought the private equity industry into a structural recovery; under a scenario where assets, capital, and exits improve simultaneously, the industry is expected to enter a 3-5 year fundraising and exit recovery period, existing technology projects will gradually enter the exit window, and alternative subsidiary direct investment businesses are expected to shift from the capital deployment phase to the value realization phase. The bank recommends focusing on leading brokerages with top-tier comprehensive primary-market business capabilities, as well as small and mid-sized brokerages with outstanding direct investment businesses and high profit elasticity. GF SEC's main views are as follows: AI-driven expansion of hard-tech project supply, combined with the entry of long-term capital and improvement in diversified exit channels, has brought the private equity industry into a structural recovery The AI industry is accelerating, and the gap between China and the US provides long-term development space for China's technology investment. According to the "2026 AI Index Report," US private AI investment in 2025 was approximately 23 times that of China, relying on "large models + large computing power" to continuously expand capital investment; facing constraints in capital and advanced computing power, China places greater emphasis on shoring up weaknesses in underlying technologies, optimizing computing efficiency, and landing industrial scenarios, promoting deep integration of AI with manufacturing, energy, healthcare, and other industries. According to Zero2IPO Research statistics, with the AI-driven expansion of hard-tech project supply, the combined investment amount in China's IT, semiconductors and electronic equipment, biotechnology and healthcare, and other fields accounted for more than 50% in 2025. Under a scenario where assets, capital, and exits improve simultaneously, the industry is expected to enter a 3-5 year fundraising and exit recovery period. Capital is concentrating toward state-owned and long-term capital, and brokerage-affiliated PEs with full-process fundraising, investment, management, and exit capabilities are expected to benefit more Brokerage private equity subsidiaries rely on group credit to undertake government and industrial capital, and leverage the three-investment resources to enhance project acquisition, pricing, and exit capabilities. According to CVInfo statistics, as of June 30, 2026, CICC Capital and CITIC Jinshi had assets under management exceeding RMB 623 billion and RMB 235 billion, respectively, forming a first-mover advantage among top-tier institutions. As fund paid-in capital and AUM grow, management fees are expected to improve; as project exits increase, Carry will be further realized. Existing technology projects are gradually entering the exit window, and alternative subsidiary direct investment businesses are expected to shift from the capital deployment phase to the value realization phase The expansion of industries such as artificial intelligence, semiconductors, and advanced manufacturing continues to increase investable projects. Corporate commercialization and subsequent financing drive the value growth of existing projects, while improvement in the exit environment enables book value to be converted into realized gains and cash returns. Projects deployed earlier are entering the realization window, and are expected to form a cycle of "expansion of technology asset supply - corporate growth and valuation improvement - exit through IPO, M&A, or equity transfer - capital recovery and reinvestment." Against the backdrop of rising prosperity in technology assets and improvement in exit channels, alternative subsidiaries with abundant existing projects, strong capital strength, and leading industrial pricing and exit capabilities are expected to be the first to release profit elasticity. Technology IPO supply and secondary market valuation jointly determine the return elasticity of sponsor co-investment The comprehensive co-investment mechanism on the STAR Market and the co-investment mechanism under specific circumstances on the ChiNext make the co-investment opportunities of alternative subsidiaries directly related to the number of IPO projects and fundraising scale. IPO expansion increases the number of co-investment projects and investment principal, while improvement in risk appetite for technology assets increases the valuation of holdings during the lock-up period, and the two together amplify book gains. According to iFinD statistics, from 2021 to June 2026, major brokerage alternative subsidiaries had cumulatively unlocked 314 co-investment projects, with unlocked market value of approximately RMB 29.231 billion, forming a certain scale of existing holdings. As the reform of the STAR Market and ChiNext deepens, the supply of technology enterprise listings improves, and existing projects are gradually unlocked, brokerages with abundant sponsor project reserves and strong technology investment banking capabilities are expected to benefit simultaneously from the expansion of new co-investment scale and the release of value from existing holdings, and the co-investment business is expected to become an important source of profit elasticity for alternative subsidiaries. Investment recommendations First, focus on leading brokerages with top-tier comprehensive primary-market business capabilities: CITIC SEC AH, Guotai Haitong AH, and CICC H, which possess private equity management foundations, technology investment banking project reserves, alternative investment capital strength, and diversified exit capabilities. Second, focus on small and mid-sized brokerages with outstanding direct investment businesses and high profit elasticity: Caitong and Changjiang. Risk warnings: technology industry development and project commercialization falling short of expectations; government fund paid-in capital and private equity fundraising falling short of expectations; recovery of exit channels such as IPO and M&A falling short of expectations; large fluctuations in technology asset valuations; project impairment and actual disposal gains lower than expected; changes in industry regulatory policies.