Rating: Cautiously Bullish ｜ Target Price: RMB 17.6–20.6 (base-case fair value range) ｜ Current Price: RMB 15.88 (2026-10-28 close, A-share) ｜ Margin of Safety: approx. +10.8% (based on base-case fair value floor) ｜ Time Horizon: 12 months
Guotai Haitong is the surviving entity of Guotai Junan Securities' share-swap absorption merger with Haitong Securities, ranking No. 1 in the industry in total assets, net capital, brokerage market share, and margin financing share. The current price of RMB 15.88 corresponds to a PB(LF) of 0.84x (based on book value per common share of RMB 18.90), at the historical lowest percentile range; a PB-ROE inversion shows the market is pricing in "sustainable ROE permanently falling to ~8.4% and trading volume center declining a further ~40% from current levels," whereas the company's normalized ROE is ~9.3% and annualized ~12% for 2026H1. We judge that valuation has already deeply priced in the cyclical slowdown, but earnings realization depends on volume stabilization and continued integration synergies; hence we assign a cautiously bullish rating: upside to base-case midpoint of ~+20.3%, downside to bear-case midpoint of ~-13.7%, with odds skewed to the upside. Key constraints: since Q4 2026, A-share average daily turnover has fallen from RMB 3.26 trillion to RMB 1.4–1.6 trillion, a high-beta structure with prop-trading-type income at 54.8% of revenue, and a dense cluster of binary events from late October through December (10-29 Orient Securities restructuring review, 10-31 Q3 earnings, 12-31 approval deadline for Guotai Junan International privatization).
Primary stock price driver: A-share turnover and margin financing center — it is the common upstream of three revenue lines: brokerage, interest income, and prop trading. Currently (2026-10-23), margin financing balance stands at RMB 2.43 trillion (down ~19.5% from the June peak), and mid-October average weekly daily turnover is ~RMB 1.58 trillion (down ~56% from the January peak). Confirmation signals for recovery: margin balance recovering above RMB 2.6 trillion and average daily turnover holding above RMB 2 trillion; falsification signals: margin balance falling below RMB 2.3 trillion or average daily turnover persistently below RMB 1.5 trillion.
Expectation gap: Price-implied earnings (~RMB 27.9 billion attributable to parent) is ~14.7% below our normalized estimate (~RMB 30.8 billion, common shareholder basis) and ~23.5% below October sell-side consensus (~RMB 34.46 billion) — the market is pricing in "ROE permanently reverting to industry average," while integration synergies, cash recovery from the asset disposal chain, and the realized high growth in non-recurring-adjusted earnings in 2026H1 (+168%) are almost entirely unpriced. At the sector level, institutional holdings of 0.60% versus a benchmark weight of 3.13% represent extreme underweight, and 20 brokers trade below book value (a decade high) — a classic "earnings rising, valuation falling" scissors gap.
Validation catalysts (time-dense): 10-29 review of Orient Securities' acquisition of Shanghai Securities; 10-31 Q3 earnings (Q3 standalone non-recurring-adjusted net profit ≥RMB 6 billion = strong, RMB 3.5–6 billion = neutral, <RMB 3.5 billion = negative); November–December progression of the 51% tender offer for Haitong Hengxin and NDRC approval of Guotai Junan International privatization (12-31 deadline); and continued validation of insurance capital accumulation. Major spoilers: collapse of the volume center (triple hit to brokerage + margin + prop trading), market drawdown on prop equity exposure (estimated notional exposure cap of ~RMB 55.8 billion), and recurring asset quality issues in legacy Haitong assets.
This report carries evidence grade B (catalyst dates verifiable from multiple sources; volume-price driver chain holds; certain share and capital measurement approaches conflict, see notes in body text). Opportunity level and real-time odds are computed by the system uniformly across the three scenarios and prices.
The most certain outcome of the merger is the leap in scale and cost efficiency: as of end-2026H1, total assets were RMB 2,502.178 billion, parent-company net capital RMB 225.987 billion (vs. CITIC Securities' ~RMB 181 billion on the same basis); brokerage share of stock/fund trading at 8.56% and margin financing share at 9.69% (per the 2025 annual report) both rank No. 1 in the industry; 2026H1 non-recurring-adjusted net profit attributable to parent was RMB 19.510 billion (+168.02%), and the expense-to-revenue ratio fell 10.12 percentage points YoY to 38.24%. But soberly: this merger is a business combination under non-common control (acquisition date 2025-03-14); the 2026H1 high growth rate includes both the inorganic component of "Haitong consolidation period extended from ~3.5 to 6 months" and the beta of doubled market volume; in the same period, CITIC Securities, not involved in consolidation, surpassed the company with H1 net profit attributable to parent of RMB 23.343 billion (+15.2% ahead); FY2025 non-recurring-adjusted weighted ROE of 7.49% actually declined 0.26 percentage points from 7.75% in 2024 — the leap from "scale champion" to "earnings champion" has not yet occurred, and this is the biggest medium-term optionality and suspense.
Of FY2025 net profit attributable to parent of RMB 27.809 billion, non-recurring gains were RMB 6.421 billion (23.1% of total), mainly due to negative goodwill of RMB 8.827 billion (pre-tax) from the absorption merger with Haitong, recognized one-off in non-operating income; the sustainable figure is RMB 21.388 billion non-recurring-adjusted. More importantly, the revenue structure: in 2026H1, investment-type income (investment income of -RMB 1.135 billion + fair value changes of +RMB 26.980 billion) totaled RMB 25.845 billion, 54.8% of revenue, tightly binding earnings to market conditions. Sensitivity analysis ranks the risk magnitudes: ① Prop trading exposure is largest — financial investments total ~RMB 1.05 trillion; every ±0.5pp in returns affects pre-tax profit by ~±RMB 5 billion (≈ ±9% attributable to parent); ② Brokerage is next — every 10% decline in turnover reduces half-year net brokerage income by ~RMB 0.99 billion; ③ Margin interest — if margin balance falls to RMB 2.2 trillion with the market (at the company's 9.69% share), annual interest income drops by ~RMB 6.95 billion (pre-tax). October volume has already fallen rapidly, and Q3 industry signals (CITIC quarterly net profit -20.19% YoY, -41% QoQ) point to weakening H2 momentum.
Three disposal lines will materialize intensively across 2026Q4–2027H1: ① Haitong Hengxin (financial leasing) received a partial tender offer from Shanghai International Group for 51% of shares at HKD 9.088 billion (H shares at HKD 2.16/share, ~80% premium); upon completion, the company's stake drops from 85% to ~41.65%–42.55% (media accounts vary slightly), and Haitong Hengxin will no longer be consolidated; estimated cash recovery from the sold stake is ~HKD 7.7 billion (estimate; company has not disclosed the amount received); ② the 24.99% stake in Shanghai Securities is being transferred to Orient Securities at a valuation of RMB 6.277 billion (review on 10-29) — note the consideration structure: only RMB 1.57 billion in cash plus 457 million newly issued Orient Securities shares (issue price RMB 10.29, ~12% inverted versus Orient's current price of ~RMB 9.08); ③ privatization of Guotai Junan International (HKD 3/share, total consideration ~HKD 7.53 billion; approved by Shanghai SASAC, pending NDRC approval, with conditions precedent to be met by 2026-12-31). On shareholder returns: FY2025 cash dividends of RMB 8.757 billion + buybacks of RMB 1.211 billion totaled RMB 9.968 billion (35.84% of net profit attributable to parent, 46.60% of non-recurring-adjusted, per annual report profit distribution proposal), plus 2026 interim dividends of RMB 5.254 billion (RMB 3 per 10 shares, 25.93% of H1 attributable profit) — the third consecutive year of interim dividends. To state plainly: the dividend payout execution (26%) fell below the 30% cap investors expected and once triggered public questioning; the 47.7862 million shares cancelled in August 2026 were a change of use of legacy treasury stock inherited from Haitong, and the company itself has no new buyback plan (management's stated position is "studying ways to further enrich value management tools") — the transmission of "cash recovery → buyback and cancellation" is currently a hypothesis, not a commitment.
The current price of RMB 15.88 corresponds to a common-share-basis PB of 0.84x (BPS RMB 18.90, excluding ~RMB 40.7 billion of other equity instruments such as perpetual bonds; on a full-scope attributable equity basis it is 0.75x), PE(TTM) of 8.64x (8.30x on a non-recurring-adjusted basis), and a dividend-plus-buyback yield of 3.57% for FY2025. Valuation tools show PB at the lowest percentile range of the past 10 years (3%–7% under different tools; note: the 2025 merger caused a structural break in share count and net assets, so historical percentiles are for reference only). Inverting PB = sustainable ROE / cost of equity (COE 9.5–10.5%, g = 0), the current price implies a sustainable ROE of ~8.0–8.8% and implied net profit attributable to parent of ~RMB 27.9 billion — effectively pricing the turnover center ~40% below current levels; whereas the company's normalized ROE is ~9.3% and annualized ~12% for 2026H1. Fund flow structure corroborates bottom characteristics: sector institutional holdings of 0.60% versus 3.13% benchmark weight (single source, for reference); NCI (New China Life Insurance) accumulated H shares this year to 20.24% (of H-share capital, ~4% of total share capital), becoming the second-largest H-share holder. The physical basis of the margin of safety is the credibility of net assets — brokers' assets are marked to market; the average maintenance margin ratio of existing margin clients is 294.77% and the average collateral coverage ratio of stock pledge financing is 364.69%; the discount to net asset value embedded in the below-book price reflects liquidity and cyclical haircuts, not asset inflation.
The securities industry's supply side is undergoing landmark consolidation: following Guotai Junan + Haitong, Guolian + Minsheng, Zheshang + Guodu, Western + Guorong, and Guosen + Wanhe, CICC's "three-in-one" merger (absorbing Orient Securities/Dongxing Securities and China Xinda Securities) reportedly settled on 2026-10-26 — under the "Six M&A Measures" framework, regulators are rapidly approving top-tier consolidations, and the "support the strong, restrict the weak" orientation is accelerating the concentration of net capital and licenses among industry leaders. On the demand side, household wealth reallocation is the medium-term theme: CICC estimates ~RMB 75 trillion of household time deposits maturing in 2026, and CITIC Securities estimates ~RMB 2 trillion of net equity market inflows in 2026; public fund AUM has grown from RMB 37.71 trillion at end-2025 to RMB 39.67 trillion at end-June 2026 (AMAC) — even with short-term volume pullbacks, a medium-term turnover center above pre-2021 levels (~RMB 1.06 trillion average daily) is supported by fund flows. Two balancing points: first, the near-term reality is a ~56% volume decline from the peak (mid-October), and the medium-term rise thesis has yet to be confirmed within the observable window; second, the head-concentration dividend is not the company's alone — CITIC leads in earnings, and the enlarged CICC group joins the competition; the claim that the company is "the biggest beneficiary" should be revised to "shared among the first tier, with the company positioned by scale and net capital."
| Metric | FY2023 (Adjusted)* | FY2024 (Adjusted)* | FY2025 | 2026H1 (Latest Period) |
|---|---|---|---|---|
| Operating revenue (RMB 100 mn) | 284.60 | 336.75 | 631.07 | 471.63 |
| Net profit attributable to parent (RMB 100 mn) | ≈93.74 | 130.24 | 278.09 | 202.60 |
| Non-recurring-adjusted net profit attributable to parent (RMB 100 mn) | — | 124.40 | 213.88 | 195.10 |
| Weighted ROE (%) | 6.02 | 8.14 | 9.78 | 6.12 (half-year) |
| Non-recurring-adjusted weighted ROE (%) | 5.56 | 7.75 | 7.49 | 5.89 (half-year) |
| Total assets (RMB 100 mn, period-end) | — | ≈104,780 | 211,433.8 | 250,217.8 |
| Net assets attributable to parent (RMB 100 mn, period-end) | — | ≈17,080 | 33,041.7 | 37,302.4 |
| Book value per share (RMB, common share basis) | — | — | 18.30 | 18.90 |
| Parent-company net capital (RMB 100 mn, period-end) | — | 983.87 | 1,850.87 | 2,259.87 |
| Leverage multiple (ex-client funds, x) | — | 4.66 | 4.84 | 4.87 |
| Asset-liability ratio (%) | — | 77.69 | 78.36 | 78.64 |
| Risk coverage ratio (%, period-end) | — | — | 258.34 | 269.86 |
| Net operating cash flow (RMB 100 mn) | — | 561.05 | 811.38 | 679.21 |
| Shareholder returns (RMB 100 mn) | — | — | 99.68 (dividends + buybacks) | 52.54 (interim dividends) |
*FY2023/FY2024 are the annual report's "key accounting data for the past three years" on an adjusted basis (original Guotai Junan surviving-entity basis, including retrospective adjustment for the standard warehouse receipt netting method); Haitong Securities is consolidated from 2025-03-14 (acquisition date), so FY2025 is not directly comparable on the same basis with prior years. FY2023 attributable profit and FY2024 total assets/net assets are approximations back-calculated from disclosed growth rates. Brokers have no gross margin/FCF/net debt-EBITDA concepts (structurally inapplicable, hence omitted); operating cash flow includes client funds and prop-trading distortions, limiting its reference value.
Reasons for Metric Changes (Items with YoY ≥ ±20%, all per company disclosures): ① FY2025 revenue +87.40%: brokerage +93.01% (higher stock/fund trading volume + Haitong consolidation), investment banking +59.39%, asset management +64.25% (consolidation), net interest income +251.20% (financial leasing consolidation + margin interest), investment income +105.07% (higher trading financial instrument gains); ② attributable to parent +113.52%: includes RMB 8.827 billion of negative goodwill from the absorption merger recognized in non-operating income (prior-year non-operating income was only RMB 5.4 million); ③ credit impairment losses of RMB 3.863 billion, +1,445.50%: "mainly due to the financial leasing business newly added from the absorption merger with Haitong Securities, and credit impairment provisions made in accordance with accounting standards for business combinations under non-common control"; ④ income tax expense of RMB 9.384 billion, +201.39%: ~RMB 2.7 billion of negative-goodwill-related income tax centrally provided in 2025Q3 as required; ⑤ 2026H1 operating cash flow +409.95%: mainly growth in brokerage client deposits with active trading.
2026H1 revenue was RMB 47.163 billion (+97.56%), net profit attributable to parent RMB 20.260 billion (+28.74%), and non-recurring-adjusted attributable profit RMB 19.510 billion (+168.02%) — the huge scissors gap between attributable and non-recurring-adjusted growth stems from the prior-year base: 2025H1 attributable profit of RMB 15.737 billion included one-off negative goodwill gains, with non-recurring-adjusted profit only RMB 7.279 billion. By quarter, Q2 standalone attributable profit of RMB 13.87 billion was the company's all-time quarterly high. In terms of structure: net brokerage income was RMB 9.942 billion (+73.41%); fair value change gains of +RMB 26.980 billion (up RMB 29.986 billion YoY) and investment income of -RMB 1.135 billion (derivative gains down RMB 13.836 billion) moved in a seesaw pattern; combined prop-trading-type income was 54.8% of revenue, the largest profit source; expense-to-revenue ratio of 38.24% (-10.12pp), with operating leverage released. Cross-comparison: CITIC Securities H1 attributable profit was RMB 23.343 billion (+69.6%), with the company second at RMB 20.260 billion, a gap of RMB 3.083 billion — the "No. 1 in scale, No. 2 in earnings" pattern is unchanged. On market expectations, sell-side consensus has been revised up from ~RMB 28 billion in early July to ~RMB 34.46 billion in October (28 estimates, driven by H1 beat); the company has not issued quantitative earnings guidance. H2 pressure from base effects and declining volume is emerging (Q3 industry turnover -21% QoQ, CITIC quarterly net profit -20.19% YoY), and full-year growth will front-load, with the Q3 report (disclosed 10-31) being the first window to validate the H2 trajectory.
Business model: A full-license integrated securities firm = light-capital intermediation business (brokerage/investment banking/asset management, earning commissions and fees) + heavy-capital business (proprietary trading/margin financing & securities lending/market-making/leasing, earning interest spreads and investment income). Revenue is essentially "a call option on market activity + a funding-cost spread on net capital." The company is dual-listed on A-shares and H-shares, controlled by Shanghai SASAC; revenue is non-subscription-based with no pricing power (commission rates and margin lending rates are in a downward channel), so volume is the absolute driver of revenue.
Earnings quality (broker-specific framework replacing OCF/ROIC/CapEx — structurally inapplicable to financials): ① ROE trend: weighted ROE rose 6.02%→8.14%→9.78% (FY2023-25), but excluding negative goodwill, FY2025 recurring ROE of 7.49% was slightly down from 7.75% in 2024 — the merger nearly doubled net assets (equity attributable to parent +93.48%), so capital expansion outpaced earnings growth and diluted returns; the ~12% annualized figure in 2026H1 reflects bull-market peaks and should not be extrapolated linearly; normalized ROE is roughly 9.3%. ② Recurring earnings test: of FY2025 net profit attributable to parent of RMB 27.809 billion, RMB 6.421 billion (23.1%) was one-off gains (mainly negative goodwill) — the true recurring profit of RMB 21.388 billion is the valuation anchor. ③ Red flags in earnings structure: investment-related income as a share of revenue was 44.7% (FY2024) → 42.1% (FY2025) → 54.8% (2026H1); directional exposure keeps expanding with balance-sheet growth, and market drawdowns will directly amplify earnings volatility. ④ Capital adequacy and leverage: leverage excluding client funds at 4.87x, risk coverage ratio 269.86%, capital leverage ratio 17.96%, liquidity coverage ratio 290.72%, net stable funding ratio 145.69% — all far above regulatory warning thresholds, leaving ample room for balance-sheet expansion and dividends. This is the "capacity utilization" metric for heavy-capital businesses; headroom equals elasticity. ⑤ Dividend capacity: the articles of association commit to cash dividends of no less than 15% of distributable profit for the year; for 2025, actual dividends plus buybacks equaled 46.60% of recurring profit, placing the company among the top-tier brokers.
Credibility: pragmatic and conservative-leaning, strong integration execution. Verifiable commitment-vs-delivery record: ① Merger synergies — the annual report self-assessment claims "initial achievement of 1+1>2," delivered as 2026H1 recurring profit +168%, No.1 in equity brokerage market share, and expense-to-revenue ratio -10.12pp (delivered on scale and cost dimensions); but the "No.1 in profit" claim and improvement in recurring ROE were not delivered (see C1). ② "Quality improvement, efficiency gains, cost reduction" — expense-to-revenue ratio improved from 44.66% to 38.24% (delivered). ③ The 47.79 million-share buyback and cancellation pledged at the 2026-06-26 EGM — completed in August (delivered). ④ Use of proceeds from the RMB 10 billion supporting placement (internationalization/trading & investment/digitalization/working capital) — RMB 6.414 billion deployed as of 2026-06-30 with no changes (on track). ⑤ Payout ratio — investors challenged the company over the "interim pre-disclosure commitment of dividends no less than 30%," while the actual interim payout ratio was 25.93%; the company responded that "30% is the shareholder-approved cap, not a commitment" (partially disputed).
Shareholder-friendliness: neutral to friendly. FY2025 dividends plus buybacks of RMB 9.968 billion (46.60% of recurring profit), three consecutive years of interim dividends, and the completion of a cancellation-style buyback in August 2026 — however, the RMB 10 billion private placement in 2025 (626 million shares issued to a SASAC-affiliated company at RMB 15.97) and the approval of RMB 45 billion in perpetual subordinated debt show equally strong capital-raising needs; the "fundraising vs. return" balance is neutral.
Risk signals: dense executive turnover during the integration period — President Li Junjie resigned in July 2026 (Chairman acting in the role), Vice President Han Zhida resigned in September 2026, Chief Risk Officer Nie Xiaogang resigned in October 2026 (CFO Zhang Xinjun concurrently assuming the role; the market has discussed CRO independence); the Oriental Securities exchange price of RMB 10.29 being inverted versus the current price triggered public investor challenges over related-party transaction pricing, with the company responding that "pricing was based on the 120-day average price prior to the pricing benchmark date and still requires regulatory approval." Related-party transactions within the Shanghai SASAC system (Oriental Securities restructuring, Haitong Haitong Lease tender offer) are frequent; pricing fairness requires ongoing monitoring.
| Segment | FY2025 revenue (share) | 2026H1 revenue (share) | Segment gross margin FY2025→2026H1 | YoY | One-line business logic |
|---|---|---|---|---|---|
| Wealth management (brokerage + credit + futures) | RMB 24.950bn (39.5%) | RMB 14.655bn (31.1%) | 54.01%→51.47% | +114.77%→+49.97% | 39.33 million clients, No.1 in the industry; monetizing market share |
| Institutional & trading (proprietary/market-making/derivatives/custody) | RMB 19.594bn (31.0%) | RMB 22.176bn (47.0%) | 68.98%→76.06% | +43.99%→+223.24% | Market-making and client-driven flow as the base, directional positioning as the upside |
| Investment management (mutual funds/asset management/PE) | RMB 7.616bn (12.1%) | RMB 4.900bn (10.4%) | 42.95%→48.71% | +63.18%→+59.20% | Controlling stakes in HuaAn/HFT, 27.775% in Fullgoal |
| Leasing (Haitong Haitong Lease) | RMB 5.491bn (8.7%) | RMB 2.101bn (4.5%) | 33.62%→41.98% | First consolidation year→-0.37% | Heavy-capital lending; disposal/deconsolidation in progress |
| Investment banking | RMB 4.747bn (7.5%) | RMB 2.273bn (4.8%) | 26.14%→16.01% | +60.21%→+61.15% | No.1 in IPO deal count, No.2 in bond underwriting |
| Other & international | RMB 0.710bn (1.1%) | RMB 1.058bn (2.2%) | -514%→-114% | Losses narrowing | Haitong International's FY2025 loss of HKD 3.268bn is a drag |
Primary profit segment: Institutional & trading — in 2026H1, with 47% of revenue and a 76.06% segment gross margin, it contributed the largest profit pool (revenue share × margin ranks first among all segments); wealth management is the second engine and stabilizer. Gross margin structure: the gap between the highest (institutional & trading, 76%) and the lowest (investment banking, 16%) is 60pp — institutional trading earns capital gains and market-making spreads with low marginal cost; investment banking is a labor-intensive channel business where the IPO deal-count-first strategy compresses fee rates; this reflects the structural difference between heavy vs. light capital and capital gains vs. labor costs. The negative international segment margin stems from Haitong International's legacy burden; the 2026H1 loss narrowed to HKD 563 million.
Based on the FY2024-FY2025 annual reports and 2025/2026 quarterly reports extracted for this analysis, the following accounting and cross-period items were identified:
Cross-period consistency: Proprietary trading as a share of revenue moved 44.7%→42.1%→54.8% (company explanation consistent: market conditions and balance-sheet expansion); weighted ROE rose while recurring ROE peaked and fell in 2025 (company explanation consistent: doubling of net assets diluted returns); the liquidity coverage ratio declined from 333.90% at end-2024 to 290.72% in 2026H1 (the company merely stated it "meets regulatory requirements" and did not explain the decline — the cost of expansion consuming the liquidity buffer is worth tracking); goodwill on the books of RMB 4.052 billion was not increased by the merger (negative differential), so subsequent impairment risk is low. Overall judgment: no systematic earnings manipulation observed, but FY2025 headline profit contains large one-off components and comparison bases are distorted across multiple adjustments; valuation and forecasts should be based strictly on recurring profit.
Current price RMB 15.88 (2026-10-28 close, frozen anchor), total shares 17.581 billion (A: 14.075bn + H: 3.506bn), total market cap ~RMB 279.186 billion (A-share price applied to all shares; if H-shares are layered at HKD 13.14, ~RMB 262.7 billion, layered-basis PB of ~0.79x — the A/H premium is 42.2%, with H-shares at a 29.7% discount to A-shares, a structural discount reflecting HK liquidity and dividend tax, not company-specific negatives). PB(LF) 0.84x (common-equity BPS RMB 18.90), in the lowest decile range of the past 10 years (tool-based estimates of 3%-7% coexist; because the 2025 merger breaks the time series, the percentile is for reference only); PE(TTM) 8.64x (recurring 8.30x) — broker earnings are at a cyclical high, so mechanically low PE percentiles are distorted and not treated as a headline signal; PB-ROE is the primary anchor; 2026E forward PE is ~8.1-8.5x. Dividend dimension: FY2025 dividends plus buybacks of RMB 9.968 billion correspond to a 3.57% yield; including 2026 interim dividends on a rolling basis, roughly 5.4%.
| Peer | PB (x) | PE (TTM) | 2026H1 attributable profit growth/scale | 2025 diluted ROE |
|---|---|---|---|---|
| CITIC Securities | 1.22 | 10.32 | +50% / RMB 23.343bn | ≈9.4% |
| China Merchants Securities | 1.10 | 7.67 | +104.87% / RMB 10.624bn | — |
| China Galaxy Securities | 1.04 | 9.09 | +20.18% / RMB 7.797bn | ≈8.5% |
| GF Securities | 1.04 | 7.50 | — / RMB 11.652bn | — |
| Huatai Securities | 0.87 | 7.56 | — / RMB 11.692bn | — |
| Guotai Haitong | 0.84 | 8.64 | +28.74% (recurring +168%) / RMB 20.260bn | ≈8.4% (recurring basis) |
The lowest PB among the six top brokers and No.1 in net capital/total assets; the PB discount reflects doubts about ROE sustainability and international legacy burdens, not asset quality.
Solving backward from PB = sustainable ROE / COE (g=0, COE 9.5-10.5%): a 0.84x PB implies a sustainable ROE of roughly 8.0-8.8% (as low as 7.6% at COE=9%; ~9.1% at COE 10.5%, g=4.5% — the conclusion is assumption-sensitive, but the central 8.4% is well below reality); implied attributable net profit ~RMB 27.9 billion, equivalent to pricing A-share turnover some 40% below the actual 2026Q3 level. A one-line "the current price requires X, while reality is Y": the current price requires Guotai Haitong to degenerate into an ordinary broker with an ROE only slightly above the industry average (8%) and to sustain that long-term, while reality is a normalized ROE of ~9.3%, an annualized ~12% in 2026H1, +168% recurring growth, and No.1 rankings across net capital and market share. Sell-side consensus (28 houses) for FY2026E attributable profit is ~RMB 34.46 billion with a median target price of RMB 24.4 (implied PB ~1.24x, +53.7% vs. current price; 66 Buy / 14 Overweight, none below Neutral) — the huge gap between the current price and the sell-side anchor itself shows that pessimistic pricing is concentrated on the price side, not the earnings side.
| Scenario | Probability | Fair value range | vs. current price | Key drivers |
|---|---|---|---|---|
| Bear | 25% | RMB 12.7-14.7 | -20.0%~-13.7% (center -13.7%) | Turnover center falls to RMB 1.2-1.5 trillion (equity basis) + proprietary drawdown; 2027E attributable profit RMB 23-25bn, ROE ~7%, PB 0.65-0.75x |
| Base | 50% | RMB 17.6-20.6 | +10.8%~+29.7% (center +20.3%) | Turnover center stabilizes at ~RMB 2 trillion, FY2026E attributable profit ~RMB 31-35.5bn, ROE 9-10%, PB 0.90-1.05x |
| Bull | 25% | RMB 22.5-25.5 | +41.7%~+60.6% (center +51.1%) | Turnover back to RMB 2.5-3 trillion + normalized IPOs + disposal chain delivery + synergies above expectations, ROE 11-12%, PB 1.15-1.30x |
Basis for base-case PB anchoring (independent of current price): the company's own 5-year median PB of ~0.94x + median of five top peers of 1.04x + sector at 1.09x (9.3rd percentile over 5 years), cross-checked with a fair line of ROE/COE≈0.95; the bull case anchors at ROE/COE 1.15-1.2 (same tier as the sell-side median target of RMB 24.4); the bear case anchors below the 10-year low PB of 0.80x — valid only if ROE falls below 8%. The external pessimistic reference (Wind's July consensus low estimate of 2026E attributable profit at RMB 28.048 billion, implying only ~RMB 7.8 billion for H2) is directionally comparable but on an annual-earnings basis; this bear case is more extreme on the PB dimension and its bounds were not directly adopted. Probability-weighted fair value ~RMB 19.0, implying ~+19.5% expected return; margin of safety (base-case fair value floor) ~+10.8%.
House earnings forecast (earnings reconciliation anchor): FY2026E revenue RMB 82-88 billion, attributable profit RMB 31-35.5 billion (center ~RMB 33 billion; recurring ~RMB 30-34.5 billion) — the assumed H2 volume-decline slope is more conservative than sell-side consensus (RMB 34.46 billion); FY2027E revenue RMB 78-85 billion, attributable profit RMB 30-36 billion (center ~RMB 33 billion), assuming turnover reverts toward an equity-basis center of RMB 2-2.5 trillion, proprietary yield normalizes to 2.8-3.2%, integration synergies save RMB 2-3 billion in costs, and lease deconsolidation drags attributable profit by ~RMB 0.7-0.9 billion. Triangulating driving assumptions, management guidance (no quantitative guidance), and sell-side consensus: we are ~4-5% below consensus; the point of disagreement is the turnover-center assumption.
Undervalued — assess quality and price separately: Quality — first-tier scale, net capital, and market share, but ROE lags CITIC, proprietary beta is high, and international legacy burdens remain; "good but not top-tier." Price — 0.84x PB at historical lows, implied ROE of 8.4% well below the normalized 9.3%, and a negative growth-option residual; margin of safety ~+10.8%. Rating: cautious overweight — the mismatch direction is clear, but the near-term reality of declining volume (Q4 turnover at RMB 1.4-1.6 trillion) and dense binary events (10-29/10-31/12-31) make the timing of thesis delivery uncertain; not suited to chasing highs, better suited to staged accumulation and adding after event validation.
2025 was a historic year for China's securities industry: 150 securities firms posted full-year revenue of RMB 541.171 billion (+23.6%) and net profit of RMB 219.439 billion (+37.3%); period-end total assets of RMB 14.83 trillion, net assets of RMB 3.34 trillion, and net capital of RMB 2.44 trillion (published by the Securities Association of China on 2026-03-27, unaudited basis). Three volume-price drivers of this boom: ① A-share turnover — full-year 2025 turnover of RMB 419.86 trillion, daily average RMB 1.73 trillion (an all-time high, ~1.6x the RMB 1.06 trillion of 2021); January-August 2026 rose further to a daily average of ~RMB 3.26 trillion (equity-fund basis +101%), falling back to RMB 1.4-1.6 trillion in mid-October; ② Margin financing & securities lending — RMB 2.54 trillion at end-2025 → peak of RMB 3.02 trillion on 2026-06-30 → fell back to RMB 2.43 trillion on 10-23 (-19.5% from peak, but still above the 2015 peak of RMB 2.27 trillion; margin balance at ~2.5% of free-float market cap is far below 2015's 4.7%, a healthier leverage structure); ③ Equity financing — 127 IPOs / RMB 223.859 billion in the first three quarters of 2026 (+190%) plus 168 secondary offerings / RMB 421.292 billion; HK IPOs in the first three quarters: 116 deals / over HKD 388 billion (more than doubling YoY); mutual fund AUM rose from RMB 37.71 trillion at end-2025 to RMB 39.67 trillion at end-June 2026 (AMAC). Outlook: CITIC Securities' non-bank chief Tian Liang (2026-09) expects industry profit of ~+14% for full-year 2026 with ROE rising to the ~80th percentile of the past decade — the industry's absolute prosperity remains in a historically elevated zone, but the marginal direction has been turning down since 2026Q3; "declining from a high" is the current cyclical position.
Brokers have no physical upstream; their "inputs" are capital (net capital determines business leverage and licensing eligibility), fintech investment (the company's 2025 IT investment was RMB 3.235 billion, with 1,314 intelligent agents), and professional talent; on the funding side, they rely on interbank borrowing/bond issuance/receipts, and the low-rate environment in 2024–2025 lowered funding costs, benefiting capital-intensive businesses. The midstream's six licensed businesses show a value distribution of "light capital, low fee rates; heavy capital, high elasticity": brokerage/IB/AM channel fee rates are continuously compressed by regulation and competition (public fund commission new rules, fee reform in three phases); brokerage sharing commissions in 2026H1 reached RMB 8.447 billion (+97.2%), reflecting "volume compensating for price." Heavy-capital proprietary trading is the largest single profit source—30 brokers' 2025 proprietary trading revenue totaled RMB 189.443 billion (+32.6%), with roughly half of leading brokers' revenue contributed by proprietary trading. Downstream are 200+ million retail investors (~2.4 million new accounts in August 2026 alone), institutional funds (public funds/insurance capital/social security's commission sharing, derivatives, custody), and issuers. Company position: full-license leader, with strong bargaining power toward the upstream funding side (AAA rating, low-cost bond issuance), weak toward downstream retail (marketized fee-rate comparison), strong toward institutions and issuers (No.1 IPO deal count, No.1 custody scale at RMB 5,454.9 billion); gross profit mainly resides in the capital-intensive institutional and trading segments (2026H1 gross margin 76.06%).
Supply side: 150 homogeneous licenses are rapidly consolidating through M&A—completed deals include Guotai Junan+Haitong, Guolian+Minsheng, Western+Guorong, Zheshang+Guodu, Guosen+Wanhe; CICC's "three-in-one" merger (absorbing Dongxing and Cinda) reportedly settled on 2026-10-26, with "New CICC" revenue to surpass Huatai and net capital leaping into the top five; capital-intensive supply is hard-constrained by net capital/risk indicators. Concentration: in 2026H1, CITIC + Guotai Haitong's combined net profit attributable to parent was RMB 43.603 billion, or 28.1% of the RMB 155.37 billion across 43 listed brokers (Wind-based estimate); the two firms' combined net capital of RMB 407 billion accounts for 16.7% of the industry; in 2025H1, the top five accounted for nearly 70% of equity underwriting (cited from CSRC website); top three A-share IPO sponsorship and underwriting revenue in the first three quarters of 2026: CICC RMB 1.569 billion (19.25%), Guotai Haitong RMB 1.491 billion (18.28%), CITIC RMB 1.106 billion. Barriers to entry: license approval + net capital thresholds + risk-control track record + underwriting reputation—a triple barrier of capital, licenses, and reputation, with new entrants almost only able to enter via M&A. Competitive intensity: the head-to-head race at the top is white-hot (CITIC vs. Guotai Haitong benchmarking on ten core metrics); price wars at the tail are brutal (margin financing rates driven below 3%, brokerage commission rates declining); substitution threats come from internet platforms (East Money's 2025 net profit of RMB 12.085 billion, entering the top eight) and household wealth diversion to bank wealth management/insurance asset management.
Cyclical coordinates: this upcycle began with the "9·24" 2024 policy package, fully erupted in 2025, peaked historically in 2026H1, and cooled from 2026Q3—the brokerage index is -18.5% from its high, underperforming the broad market by ~14pct; sector PB of 1.09x sits at the 9.3% percentile of the past 5 years, 20 brokerage stocks trade below book (a ten-year high, vs. only 4 at end-2025), and institutional holdings are 0.60% vs. a 3.13% benchmark weight—"earnings rising (listed brokers' net profit for the first three quarters estimated +30%) while valuations falling (wave of below-book stocks + extreme underweight)" is the industry's most striking current feature. Leading indicators: daily average turnover and stock/fund trading volume (most forward-looking), margin financing balance and its share of purchases, IPO acceptance/hearing pace, new account openings, number of below-book stocks and institutional holdings. Regulatory direction is neutral-to-positive: concession-type measures (public fund fee reform's third phase ending 2026-01-01, annual concessions exceeding RMB 50 billion; commission new rules compressing sharing fee rates) squeeze light-capital fee rates, but supply-side "Six M&A Measures" with fast approvals of head-to-head consolidation and "supporting the strong, restricting the weak" systematically benefit net-capital-rich leaders; the SFISF swap facility (total quota RMB 500 billion, two rounds already executed), long-term capital entering the market, expansion of the Cross-Boundary Wealth Management Connect, and the "15th Five-Year Plan" comprehensive investment-financing reform (STAR Market "1+6", ChiNext deepening) continue to channel demand into capital-intensive and institutional businesses. The CSRC Chairman's "market stabilization mechanism" remarks at the Financial Street Forum on 2026-10-19 constitute a policy-bottom signal.
Guotai Haitong is the merger-born "scale No.1, profitability No.2": total assets RMB 2.50 trillion (~17% of the industry), net assets attributable to parent RMB 373.024 billion, and parent-company net capital RMB 225.987 billion all rank No.1 industry-wide (net capital leads CITIC by ~25%, parent-company regulatory basis; the company's annual report self-assessment of "comprehensively leading capital strength" is consistent with this); brokerage revenue RMB 15.138 billion (2025, industry No.1), margin balance RMB 246.206 billion (9.69% share, No.1), No.1 IPO deal count + No.2 sponsorship revenue in the first three quarters of 2026. But on profitability, 2026H1 net profit attributable to parent of RMB 20.260 billion trails CITIC by RMB 3.083 billion, mainly due to three shortcomings: asset management (revenue RMB 6.393 billion vs. CITIC's 12.177 billion), proprietary trading (RMB 24.57 billion vs. 37.035 billion in 2025), and international business (Haitong International FY2025 loss of HKD 3.268 billion). Share trends: since the merger, brokerage, margin, and IB shares have all risen (margin share +0.52pp to 9.69%, new-client share 10.13%), so "1+1>2" holds on the share dimension. Moat sources: scale leap in net capital/clients/licenses + A+H dual financing channels + Shanghai SOE backing (which also brings governance constraints from related-party transaction frequency and state objectives). Positioning judgment: one of the top beneficiaries of head-concentration dividends (first tier alongside CITIC and the expanded CICC system), a catching-up "profitability option" contingent on asset management integration (Huaan + Haitong Fortune path under study) and turnaround of international business.
The decisive factor in broker financial forecasting lies not in product cycles but in three high-frequency trackable volume-price variables; this section presents the sensitivity benchmarks used in this report (detailed calculations in C2 and the risk chapter):
Cautiously bullish rating (12 months, overall confidence 0.60): 0.84x PB deeply prices in the cyclical downturn; the gap between normalized ROE of 9.3% and implied 8.4%, negative-growth option residual, extremely low institutional positioning, and insurance capital accumulation create asymmetric odds (central-case upside +20.3%/+51.1% vs. downside -13.7%); but the volume decline is not yet falsified and binary events cluster in Oct–Dec, with directional realization dependent on validation, so confidence is disciplined. Strategically: the current price range suits staged accumulation/holding; 10-29 Orient Securities hearing and 10-31 Q3 results (key watch: Q3 standalone non-GAAP net profit tiers ≥6.0/3.5–6.0/<3.5 billion RMB for strong/medium/weak) form the first validation pair—add on validation pass; if margin balance falls below RMB 2.3 trillion or daily turnover persists below RMB 1.5 trillion, volume-falsification signals should trigger reduced exposure.
Risk warnings and falsification conditions (formal summary): ① volume-center collapse causing a triple hit to brokerage, margin, and proprietary trading (most critical); ② market drawdown on proprietary equity exposure (nominal cap ~RMB 55.8 billion; a 20% drawdown implies a pre-tax upper-bound estimate of ~-RMB 11.2 billion); ③ recurrence of legacy Haitong asset quality issues (annualized credit impairment ~RMB 3 billion could re-widen; Haitong International losses expanding again); ④ integration execution risk (dense executive turnover, risk-control independence with CFO doubling as CRO); ⑤ Orient Securities deal rejection/delay and fair-value volatility from inverted share-swap consideration; ⑥ dilution from the RMB 45 billion perpetual bond coupons and sustained fee-rate regulatory pressure.
Report data as of 2026-10-28 (price freeze anchor: A-share close of RMB 15.88). Fiscal years follow reporting periods; FY2023/FY2024 are adjusted continuing-operations figures, with Haitong Securities consolidated from 2025-03-14. This report is independent research and does not constitute investment advice.