Since it was previously reported that CITIC Securities will merge with CITIC Construction Investment to create an "aircraft carrier-class" brokerage, plus I have used CITIC Construction Investment products before, today I will analyze CITIC Construction Investment from several dimensions , To take everyone to understand this company in depth.
First of all, I want to tell you that CITIC Construction Investment is currently the second largest company in the A-share securities sector by total market capitalization. I hope everyone has a general idea.
The development history of my country Securities Investment Corporation
Before 2005, there were three major securities companies in China, namely Southern Securities, Cathay Securities and China Securities . However, since 2001, securities firms have entered a bear market and their performance has been worse than a year. , And even the entire industry is at a loss. In this case, the brokerage began to take risks. China Securities encountered a series of operating errors and major violations, and its business license was finally revoked in 2005.
was also in this year. CITIC Securities, which had been dormant in the crisis for a long time, joined hands with CCB Investment to invest 4.6 billion yuan to swallow China Securities. Among them, CITIC Securities invested 60% to establish China Securities Construction Investment Securities Co., Ltd. . It is the predecessor of China CITIC Construction Investment Company. It is obvious that China CITIC Construction Investment was a subsidiary of CITIC Securities at that time.
Only in 2010, due to the regulatory requirements of “one participation and one control” in the industry, CITIC Securities transferred 45% and 8% of the equity to Beijing State Management Center and Century Golden Resources Investment Group, and China Construction Bank 40% of the equity was transferred to Central Huijin Investment Co., Ltd. for free. These major equity changes were equivalent to turning China CITIC Construction Investment Co., Ltd. into a state-owned enterprise. Since then, CITIC Securities has lost control of CITIC Construction Investment. right. After
is the capital path of China Securities Construction Investment Co., Ltd. In 2011, the limited liability company was changed to a company limited by shares to pave the way for the listing. After a few years, it was listed on the Hong Kong stock market in 2016 and listed in A shares for the first time in 2018.
At present, the main shareholders of China Securities are as follows:
CITIC Securities just keeps on the line of major shareholders holding more than 5% of shares. It seems that they still care about the position of this major shareholder.
The above summary is that the predecessor of CITIC Construction Investment is China Securities, and it has been a subsidiary of CITIC Securities for a few years, and then it was put under state management until now.
Current status of China Securities Investment
I wrote an analysis of Oriental Fortune before, which was based on the Internet brokerage, and because of the simple business of Dongcai brokerage, I did not make a detailed analysis of the business of traditional brokerage.
However, CITIC Construction Investment is a traditional brokerage company, which involves many brokerage businesses, and the business composition has a very large impact on performance. I take this opportunity to add some more in this regard, and it can also help everyone better understand the brokerage industry.
According to the annual report, the business types of China Securities include investment banking, wealth management, trading and institutional customer service, and investment management. The development of these businesses is as follows. Different securities companies have different business divisions, but basically The similarities and minor differences are listed in more detail by CITIC Construction Investment. Many businesses above
are very unfamiliar to us. We are generally exposed to wealth management business, such as securities trading commissions and obtaining related consulting services, which are brokerage and wealth management business of securities firms, and financing and leverage on securities accounts It is classified as the margin trading and securities lending business of the brokerage.
However, sometimes we also come into contact with some trading and institutional customer service businesses. For example, buying wealth management products in a securities company is classified as a fixed-income product sales and transaction business of a securities firm.
And these other businesses are basically serving large customers such as listed companies, institutions, and fund companies. The business content is more complicated and requires sufficient investment and research strength to support.
Judging from the annual report data of China Securities Investment Corporation in recent years, investment banking and wealth management business income have always accounted for a large proportion of business income. From a trend point of view, wealth management business income has a relatively large proportion Decline, while the proportion of transaction and institutional customer service business revenue has continued to increase. In 2019, it has become the business with the second highest proportion of revenue.
availableIt is obvious that since 2016, CITIC Construction has shifted from the commission business to a more specialized field, gradually weakening the impact of the wealth management business on the entire revenue, which also shows that CITIC The strength of the research team behind Jiantou continues to increase.
In 2019, its revenue structure has reached a very balanced level, which ensures that in the future, CITIC Construction Investment can effectively enjoy the dividends brought by the development of any business sector of the brokerage.
From the perspective of profit contribution, China Securities Investment Bank’s investment banking business has always created very stable profits, while trading and institutional customer service business profits have been steadily increasing. Only the wealth management business, which is the commission income, has very unstable profit levels. Among them, in the 2018 bear market, its profit accounted for only 2.28%. It recovered in 2019, but there is still a big gap from the level of 2017, which proves that this is a business that depends on the sky.
The above is that the investment banking business of China Securities has always occupied a very important position in all businesses, and it is the mainstay in both the revenue and profit side. In recent years, the revenue share of its wealth management business has declined significantly, and the profit creation ability of this business is also full of uncertainty. Trading and institutional customer service businesses have grown significantly in recent years, and both the revenue and profit ends have created good benefits for the company. By 2019, the company's business structure has been very balanced, which will help the company take the initiative in the rapid development of any business field in the industry in the future.
CITIC Construction Investment’s future development direction
It is well known that China’s A-share market has short and long bulls and long bears. In a bear market, on the one hand, looking at the ever-declining market, new account openings will decrease, and on the other hand, the number of old investors in the market may be Many are stuck, or despair of the stock market and withdraw the principal in the account, leading to reduced transactions. These two factors determine that the brokerage commission income in the bear market cannot be high. This is no matter how good your service quality is, there is no way to make up In addition, the various business departments in the bear market still have to operate, and employee salaries have to be paid. Therefore, the gross profit margin of the brokerage business will also be relatively low. The performance of China Securities and Construction Investment in 2018 clearly shows the uncertainty faced by this business. Sex.
In addition, the brokerage business is also facing very serious homogenization competition. Simply put, this business does not require strong professional capabilities. It can be done by a broker, and the commission rate is determined by the broker. Therefore, the competition in this business is very fierce. For example, Eastern Fortune, although it basically does not have an analyst team, it can also rely on brokerage business to realize traffic monetization.
At present, the various business departments of brokerages in the market are fighting openly and secretly. They rely on low commissions and free five-level methods to attract customers to open accounts. Many formal platforms have a commission rate of 2.5 million. And some sales department account managers cooperate with some big v. Some platforms have also opened a low commission of 1.5 million and five free. If the industry stipulates that the commission rate should not be too low, and price wars cannot be played, I think zero commission is also very possible if it is only determined by the market. I believe that with With the further improvement of the capital market in the future, the commission rate will decline.
Therefore, the current high proportion of securities brokerage business income is not a good thing. The current business composition of China Securities Investment Corporation is more conducive to crossing the bull and the bear and winning long-term development. Z5z
Let’s talk about the investment banking business. The investment banking business is mainly the underwriting and issuance of some stocks and bonds, which will undoubtedly be affected in the bear market, but this effect should be analyzed separately. On the one hand, the stock market has been falling, and the management may require less issuance New stocks ease the pressure on market liquidity. The performance of stock underwriting will definitely be affected. At the same time, the return on stock assets is not good and is not to be seen. Bonds, such fixed-income assets, will be favored by people. Will be sought after. In this way, even in a bear market, investment banking business performance will face much less pressure than brokerage business. It is easy to find the changes in the underwriting scale of equity and debt of China Securities from 2017 to 2018. the difference.
Furthermore, due to the needs of the development of the real economy, the shares to be issued still have to be issued, and the debts to be issued cannot be dragged forever. With the activation of financing platforms such as the Science and Technology Innovation Board and the New Third Board, the powerful leading brokerage firms are still Able to obtain sufficient qualifications for underwriting stocks and bonds. Comprehensive analysis shows that investment banking business is able to be both in a bear market and a bull market.Stable to create performance.
In addition, for the transaction and institutional service business, the business structure inside is more complicated. Due to space limitations, I am not easy to talk about it. As long as you know that with the continuous growth of my country’s high-net-worth population, investment in fixed-income products, different investment products, domestic and overseas The investment demand of China Securities will continue to grow. In this regard, the business itself is relatively diversified and more suitable for crossing the bear market. In 2018, China Securities Construction Investment also maintained high growth in this area.
Through the above analysis, we can understand that China CITIC Construction Investment is currently the investment banking business and diversified investment service business occupying a leading position in revenue. From the speech of the chairman of the 2019 annual report, "Accelerate the construction of a domestic first-class modern investment bank And wealth management institutions. It can also be seen that CITIC Construction Investment is obviously no longer a second-time securities firm that has been hyped by hot money before, but a company that is likely to become a top-ranking domestic securities firm. With the restrictions on the sale of shares in July this year We should pay more attention to its intrinsic value rather than hype value.
Speaking of value, just talk about the current stock price of China Securities. I believe that everyone has a common understanding. The stock price must be overvalued, but because its circulating market value is too low, the data is serious due to capital speculation. Distortion, although the performance and fundamental support also played a certain role, but this price is very outrageous no matter which industry compares it. The possibility of a merger between
and CITIC Securities
First of all, it is clear that in the current industry environment, the possibility of a merger between CITIC Securities and CITIC Construction Investment is almost zero.
First, starting from the competitive landscape of the industry, the top securities firms recognized in the industry include CITIC Securities, Huatai Securities, Haitong Securities, Guotai Junan, and China Securities. Among them, the total market value of CITIC Securities and CITIC Construction exceeds 250 billion, and the rest are At around RMB 150 billion, if CITIC Securities and China Securities are merged, the market value of the combined company will definitely be a few blocks behind.
Then, with the integration of the company’s resources after the merger, the company has more business departments in various fields such as brokerage business and a stronger team in the investment banking business. Then several other top brokerages will face very great pressure. The living conditions are worrisome, just like in the Three Kingdoms period, when any country is annexed, the remaining two countries will inevitably decide a winner. With the demise of Shu, Wu will eventually be unified. If the two merge now, it is very likely that they will evolve into an oligopoly market, which is not conducive to market development.
Second, from the perspective of the company, the investment banking business of CITIC Securities and CITIC Construction Investment is very strong, and the equity underwriting business of CITIC Securities ranks first in China. In 2019, the total underwriting amount reached 279.803 billion yuan. , And the total equity underwriting amount of CITIC Construction Investment in 2019 was 38.194 billion yuan, ranking 5th in the industry; the amount of bond underwriting CITIC Securities and CITIC Construction Investment in 2019 were 1001.53 billion yuan and 941.598 billion yuan, ranking 1st and 2nd in the industry.
In the company's professional composition, the investment bank researchers of the two companies accounted for about 10%. The upper and lower figures are CITIC Securities and CITIC Construction Investment. The merger of the two companies will certainly improve the overall investment banking strength, but there is not much room for it, because both are already at the top of the industry, and in this process, many researchers who are already relatively good may have to be eliminated. Waste of resources.
In addition to the brokerage business, CITIC Securities acquired Guangzhou Securities in 2019 to enhance its competitiveness in the Guangdong-Hong Kong-Macao Greater Bay Area. This is a very purposeful acquisition because GF Securities has a very large influence in Guangdong. It is also relatively difficult for CITIC to enter the Guangdong market by relying on its own strength. Therefore, it chose to acquire a local brokerage firm in Guangdong. This also saves the time and cost of establishing a new sales department in Guangdong and facilitates the rapid development of brokerage business.
Let’s look at the business divisions of CITIC Securities and CITIC Construction Investment (CITIC Securities above, and CITIC Construction below), which are mainly concentrated in economically developed areas such as the Yangtze River Delta, the Pearl River Delta and Beijing. Such geographic attributes are merged. Can it bring dividends to the brokerage business? ShowHowever, it cannot, and even faces the dilemma of the dismantling of the sales department in the same area, which will also cause the unemployment rate of regional personnel to increase. This obviously does more harm than good to the company and the society.
To sum up, I think that CITIC Securities and CITIC Construction Investment have not merged in recent years, but it is definitely not groundless to build an aircraft carrier-level brokerage, because the concentration of the securities industry is still relatively low, some small brokerages have been annexed, and some have emerged. Brokers with strange names have severely reduced the efficiency of the entire industry. With the opening of the capital market, it is imperative to increase the concentration of the brokerage industry.
thinks from another angle, why do we need to build two embryos that can become aircraft carriers into one aircraft carrier? With a long-term perspective, we may be able to create an "aircraft carrier group" in the brokerage industry in the future.
(For compliance considerations, the content of this article is only for personal investment considerations, not as trading recommendations. Trade accordingly, at your own risk.)
