CITIC Securities Co., Ltd. – Leading brokerage company in different business August 27, 2019 107

  • CITICS reported 1H19 net profit of RMB 4bn, up 15.8% YoY.
  • 1H19 revenue of RMB 28.39bn, up 4.59% YoY, of which the securities trading revenue increased 3.76 % YoY to RMB 10.4mn.
  • Overall, we are positive on CITICS due to: 1) its leading positions in asset management and investment banking business; 2) Competitive on the newly launched Kechuang board. CITICS currently trades at 0.99 P/B and 15.1 P/E.

 

Company Description:

CITIC Securities (CITICS) Co., Ltd. provides securities services in China. The Company provides securities brokerage, securities trading, securities underwriting, and other services. CITIC Securities also provides investment banking, asset management, investment consulting, and other services.

 

Why we like CITICS:

Asset management ranking the first in the industry. The AUM of the CITICS was RMB 1,296bn and the assets under active management amounted to RMB 563bn. As at the end of the 1H19, the market share of the privately-offered asset management business as defined under the new regulation regarding the asset management businesses of CITICS was 9.98%, ranking the first in the industry.

Investment banking remained in the leading position. In the 1H19, the pace of IPOs remained stable with a cumulative approval rate of approximately 82% for IPOs. Although A-share equity underwriting contracted 13.45% YoY to RMB 610bn, CITICS remained its leadership in the investment banking business with a market share of 20.13% (+5ppt from FY18). In the 1H19, CITICS undertook a total of 942 lead bond underwriting projects relating to different debentures, with the amount of RMB 452bn, representing 4.92% of the market share. CITICS ranked the first in the industry in terms of both the bond underwriting amount and the number of bond underwriting projects.

Competitive on the newly launched Kechuang board. In the 1H19, the Company expanded its client base for clients with the major in the Kechuang board. The Company has advised on 13 STAR Market IPOs as of 30 June 2019.

 

Concerns we have:

Brokerage business likely faces pressure. 1H19 commission income from brokerage business contracted 0.15% YoY to RMB 5.3bn, may because China A-share market cooled down in 2Q19. The positive is CITICS owns a higher portion of institutional investors than retail investors in its client mix.

 

Recommendation

Overall, we are positive on CITICS because of 1) its leading positions in asset management and investment banking business and 2) Competitive on the newly launched Kechuang board. CITICS currently trades at 0.99 P/B and 15.1 P/E.

 

Red line = 200 periods moving average

Blue line = 50 periods moving average

Green line  = 22 periods moving average

 

Relative Strength Index

Support 1: 12.91                     Resistance 1: 16.88

 

CITIC Securities Co Ltd (HKE:6030) current sentiment for a prolong ranging period. However, technicals suggest that the stock may be gearing up for a short term rally.

  • Falling wedge formation.
  • Strong bullish closure and rejection above 88.6% of the total range
  • Strong bullish rejection above 12.84 suggests that the stock may be forming a potential double bottom.
  • The price is trending at the lower band of the range. Most times the bullish momentum occurs near the lower band of the range.

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