Rating: Neutral ｜ Target price: RMB 6.7–7.2 (base-case fair value range) ｜ Current price: RMB 6.44 (close, 2026-10-28) ｜ Margin of safety: ~+4% (= (base fair value floor of RMB 6.7 − current price) / current price) ｜ Time horizon: 6–12 months ｜ Valuation assessment: reasonably low
Total market cap ~RMB 53.0 billion (82.32 billion total shares, all unrestricted float A-shares); PB(LF) 1.00x (BPS RMB 6.41, 2026-06-30, its own 10-year low percentile; 10-year median 1.44x); PE(TTM) 11.7x (earnings at a historically high percentile, so the percentile metric is distorted and for reference only); dividend yield (TTM) ~2.25%. 52-week range RMB 6.39–8.43, YTD approximately −18%.
1x PB at a 10-year low percentile, with dividends and book value providing a floor, but declining market turnover suppresses earnings realization — Neutral, stay on the sidelines. Founder Securities is the most distinctly wealth-management-focused broker among mid-tier peers: FY2025 revenue RMB 10.504 billion (+36.08%), net profit attributable to parent RMB 3.970 billion (+79.85%); 2026H1 net profit attributable to parent of RMB 2.957 billion (+24.06%) sustained high growth, with a net margin of ~38% leading mid-tier peers. However, brokerage + proprietary trading + margin financing interest account for 90.5% of revenue, so earnings are almost entirely tied to market turnover — average daily trading volume has fallen from ~RMB 3.1 trillion in Q1 2026 to ~RMB 1.83 trillion in September, and margin financing balance has dropped from a peak of ~RMB 3.0 trillion to ~RMB 2.45 trillion in mid-October. At the current price of RMB 6.44, corresponding to 1.00x PB, it trades at only a 0.5% premium to BPS, with dividends providing downside cushioning; but "1x PB = floor" is not absolute — in October 2026, 20 brokerage stocks already traded below book (including top brokers with higher ROE), and if the turnover center slides toward the RMB 1.5 trillion level, normalized net profit would fall from RMB 4.2–4.8 billion to RMB 2.6–3.7 billion. The base-case fair value of RMB 6.7–7.2 is only 4%–12% above the current price, offering a thin margin of safety (~4%) — hence a Neutral rating: downside is protected but upside lacks a trigger. Await any one of three developments — turnover stabilizing at an RMB 1.8–2.0 trillion center, Q3 earnings resilience being validated, or a breakthrough in Ping An-group integration — before turning positive. The nearest test point is the Q3 report on October 30.
Key evidence:
Founder's brokerage base is solid: nearly 17 million client accounts, client assets surpassing RMB 1 trillion for the first time at end-2025 (+32.63%), margin financing balance of RMB 64.941 billion at a record high, and H1 wealth management revenue up nearly 50% YoY. But the premise must be confronted squarely: this report's normalized center (RMB 4.2–4.8 billion, ROE 7.5%–8.5%) rests on "average daily turnover of RMB 1.8–2.0 trillion as the new normal," which reflects the high-percentile levels of 2025–2026, not the 2019–2024 historical mean (center ~RMB 1.0–1.2 trillion); if turnover reverts to the RMB 1.5 trillion level, the center falls to RMB 2.6–3.7 billion and ROE to 5%–6%. Moreover, the H1 annualized ROE of 11.4% is a linear extrapolation — H2 2025 contributed only 40% of full-year profit, and a weakening-turnover H2 would make linear annualization systematically too high.
Key evidence:
Vertically, 1.00x PB is the lowest in Founder's own 10-year series, at only a 0.5% premium to BPS of RMB 6.41, with a ~2.25% dividend yield. Horizontally, two comparisons: vs. mid-tier peers (Everbright 1.01x / ROE 5.3%, Industrial 0.84x / 4.8%, Zhongtai 0.95x / 3.1%, Changjiang 1.09x / 9.1%), Founder's ROE of 8%+ at a modest PB is not overvalued; vs. top brokers (Guotai Haitong ~0.86–0.88x, ROE comparable to or higher than Founder's), Founder at 1.0x has no discount advantage. The conclusion is reasonably low: 1x PB is a relative support, not an absolute floor — with sector below-book counts at a 10-year high, trading below book is not impossible. This report's base-case fair value of RMB 6.7–7.2 (PB 1.0–1.08x × 2026E BPS of ~RMB 6.7) is anchored on sector-relative pricing (Zhongyuan Securities sees Q4 sector PB at 1.10–1.30x; Soochow estimates ~1.0x for large brokers) plus peer PB-ROE interpolation, cross-checked with PE (net profit RMB 4.2–4.5 billion × 12–13x ≈ RMB 6.6–7.1); under the Gordon absolute framework (sustainable ROE 7.5–8.5%, cost of equity 10%), fair value is lower (see the valuation chapter's three-tier value, EPV of RMB 5.47) — the base range in fact embeds sector-relative pricing and dividend support, which we state explicitly rather than conflate.
Key evidence:
Founder Securities' controlling shareholder is New Founder Group (28.71% stake); China Ping An indirectly controls the company through it, with the National Council for Social Security Fund holding 13.24% as the second-largest shareholder. Resolution of the same-industry competition faces a hard institutional constraint (a CSRC approval requirement, with market-reported rectification deadline around end-2027) and policy tailwinds (dense M&A deal closings, approval channels proven efficient) — a unique option distinguishing Founder from all mid-tier peers. But the other side must be stated honestly: the matter has been suspended for years with no official timetable, and "plan-level progress within 6–18 months at ~20%–25%" is a subjective estimate, not a derivable probability; moreover, the path runs both ways — Founder surviving as the listed platform (absorbing Ping An Securities) would be a major positive, while Founder being absorbed and delisted, or disposed at a discount, is an adverse scenario with uncertain consideration. An option's existence ≠ a one-way bullish call.
Key evidence:
The downward turnover direction is cross-confirmed by trading volume, margin financing, and account opening data, and 2025Q4 already demonstrated the transmission mechanism: low turnover + concentrated year-end fee impairments produced a standalone non-recurring loss of RMB −172 million. But near-term profit-side evidence is inconsistent: CICC expects industry Q3 standalone net profit +15.5% YoY (2026-10-13), while CITIC Securities' actual 9M26 was +32.66% (disclosed Oct 26) — Founder's H1 proprietary income (investment income + fair value changes) of RMB 2.186 billion, +10% YoY, shows non-directional strategies partially hedged the turnover decline. Two structural long-term constraints also remain: margin financing market share stagnant at 2.15% for two years (scale grows, share doesn't), and brokerage commission rates and public fund shelf commission rates trending down (industry shelf fee rate fell from ~8 bps in 2021 to ~3.65 bps in 2025). The Q3 report on Oct 30 — standalone net profit (base: RMB 1.415 billion) and proprietary trading line items — is the nearest window to test this disagreement.
Key evidence:
The dividend trajectory is clearly rising (FY2023 payout only 8.8% → FY2024 40.0% → FY2025 30.1% across three distributions) — an important cash flow support for the 1x PB valuation floor. But two caveats: first, the "three-year cumulative ≥ 45% of average annual distributable profit" implies an annual floor of only ~15%, weaker than the market's literal impression of "30%+ annually"; and dividends are pro-cyclical — on bear-case profits of RMB 2.6–3.7 billion with a 30% payout, the dividend yield would be only 1.5%–2.1%, so the "protection" thins as the price falls. Second, China Xinda (~7.2% stake) has repeatedly filed reduction plans without executing them, but amid AMC consolidation (Xinda Securities has already been merged into CICC), its incentive to dispose of non-core equity may rise; an eighth reduction plan could be filed at any time, constituting a potential supply disturbance. What is clean: a pledge ratio of just 0.49%, no lock-up unlock batches, and no refinancing dilution in three years (share count unchanged).
| Metric (RMB 100M unless noted) | FY2023 | FY2024 | FY2025 | 2026H1 (latest period) |
|---|---|---|---|---|
| Operating revenue | 71.19 | 77.18 | 105.04 | 73.41 |
| Net profit attributable to parent | 21.52 | 22.07 | 39.70 | 29.57 |
| Non-recurring-adjusted net profit attributable to parent | 18.63 | 27.93 | 36.05 | 29.95 |
| Weighted ROE (%) | 4.88 | 4.72 | 8.01 | 5.68 (annualized ~11.4) |
| Net brokerage fee income | 32.74 | 40.36 | 55.78 | 34.13 |
| Net investment banking fee income | 2.11 | 1.76 | 1.67 | 0.66 |
| Net asset management fee income | 1.81 | 2.38 | 2.10 | 0.85 |
| Net interest income | 14.21 | 13.59 | 17.43 | 10.48 |
| Proprietary income (investment income + fair value changes, our estimate) | 15.67 | 13.49 | 20.95 | 21.86 |
| Net operating cash flow | −83.11 | 3.29 | 10.66 | 32.66 |
| Parent-company net capital | 280.60 | 313.80 | 346.74 | 357.30 (2026-06-30) |
| Risk coverage ratio (%, regulatory floor ≥120) | 248.53 (old basis) | 282.05 | 310.35 | 281.93 |
| Book value per share (RMB) | — | — | 6.17 | 6.41 (2026-06-30) |
Note: Gross margin, free cash flow, net debt/EBITDA, and other industrial metrics are inapplicable to brokers and have been replaced with regulatory metrics such as net capital / risk coverage ratio / leverage under financial-industry conventions; operating cash flow includes client funds and financial asset investment changes — the three-year OCF/net profit ratios of −3.70/0.15/0.27 reflect structural distortion of broker financial statements rather than earnings quality issues; balance sheet stocks are as of the latest period (2026-06-30): cash of RMB 89.567 billion (of which client funds RMB 70.859 billion; own cash + settlement reserves RMB 16.812 billion), financial investments of RMB 123.643 billion, interest-bearing debt (short-term financing + interbank borrowings + resale agreements + bonds payable) of RMB 148.532 billion, and an asset-liability ratio of 76.69% excluding client funds.
Reasons for metric changes (YoY ≥ ±20% excerpts, all per management explanations): FY2025 revenue +36.08%, "mainly due to increased wealth management business and subsidiary revenue"; net profit attributable to parent +79.85%, "mainly due to increased wealth management business and subsidiary income"; investment income −54.19%, "mainly due to reduced returns on financial instruments held" (largely offset against the fair value change line; combined proprietary income of RMB 1.349 → 2.095 billion); fair value changes swung from −RMB 1.921 billion to +RMB 598 million, "due to changes in fair value of financial assets and investment properties"; credit impairment swung from a provision of RMB 351 million to a reversal of RMB 68 million, "due to recovery of debt-for-asset collateral and large prior-year provisions"; income tax +1534%, "due to increased taxable profit." 2026H1: net interest income +44.77%, "due to increased margin financing interest income"; credit impairment provisions of RMB 303 million (vs. a reversal of RMB 4 million in the prior-year period), "due to credit impairment provisions on financial assets"; investment banking / asset management net fee income −33.58%/−33.33%, not itemized by the company (Founder Underwriting & Sponsorship: H1 revenue RMB 50 million, net loss RMB 37.49 million); net brokerage fee income +46.32%.
2026H1 revenue of RMB 7.341 billion (+29.62%), net profit attributable to parent RMB 2.957 billion (+24.06%), non-recurring-adjusted RMB 2.995 billion (+26.74%; total non-recurring items −RMB 38 million — clean quality). Structurally, the wealth management mainline was strong: net brokerage fee income RMB 3.413 billion (+46.32%), net interest income RMB 1.048 billion (+44.77%, margin financing balance of RMB 64.941 billion at a record high), proprietary income RMB 2.186 billion (+10%, after Q1 was −103% YoY before a Q2 recovery); weak spots were investment banking (RMB 66 million, −33.58%) and asset management (RMB 85 million, −33.33%). Versus market expectations: there is no sell-side consensus anchor for the standalone quarter; measured against full-year consensus (FY2026 ~RMB 4.94 billion), H1 achieved ~60% — ahead of schedule (a low H2 2025 base remains ahead). Two cautionary points: H1 profits were earned in a super environment of ~RMB 2.7 trillion average daily turnover (H1 A-share turnover of RMB 31.8 trillion, +95% YoY); and credit impairment swung from a prior-year reversal to a provision of RMB 303 million, with the margin lending impairment provision balance rising from RMB 279 million to RMB 451 million within six months (+61.8%).
Business model: A hybrid broker combining capital-light intermediation (brokerage/margin financing/distribution/asset management/investment banking) with capital-heavy business (proprietary trading/market making), with wealth management as its foundation. Revenue is non-recurring with no pricing power—commission rates, margin financing rates, and fund allocation rates are all declining long-term; revenue elasticity comes from volume (trading value, margin financing scale) rather than price.
ROE and DuPont Decomposition (replacing the FCF/ROIC/CapEx framework): Weighted ROE went from FY2023 4.88%→FY2024 4.72%→FY2025 8.01%→2026H1 5.68% (annualized ~11.4%). FY2025 DuPont decomposition: net margin 37.2% × asset turnover ex-client assets 0.056x × equity multiplier ex-client equity 3.83 (our estimate; product ~7.95%, matching the disclosed 8.01%)—the ROE uplift was mainly driven by net margin (i.e., a profit margin amplified by market beta), not by structural improvement in leverage or turnover. The 4.7%–5.1% of FY2022–2024 represents the true baseline under normal volume conditions; 8%+ depends on the elevated volume center holding.
Proprietary trading returns and capital-heaviness: Proprietary return rate (proprietary income excluding one-offs / average financial investments) was ~1.27% (FY2024)→1.51% (FY2025)→~3.89% annualized in 2026H1 (our estimate). Financial investments of RMB 123.643 billion = 232% of net assets, of which bonds ~58% (trading bonds RMB 41.472 billion + other debt investments RMB 30.205 billion, etc.), mutual funds RMB 18.394 billion, and equities only RMB 4.767 billion—per company disclosure sensitivity: ±5% change in fair value of financial instruments → ±11.60% change in net assets. Holdings are fixed-income-dominated with small equity exposure (proprietary equity/net capital 46.78%); directional risk is controllable but interest rate risk is significant (see the broker-specific chapter). Capital-light fee income share fell from 57.7% in FY2024 to 48.6% in 2026H1, with capital-heavy business rebounding—the company is increasing bond investments and margin financing; dependence of earnings quality on market conditions is deepening, not easing.
Moat / warning signals: Client assets exceeding RMB 1 trillion, nearly 17 million accounts, and Hunan regional branch density are client-acquisition assets accumulated over years; but margin financing market share has stagnated at 2.15% for two years, and brokerage net income market share (FY2024 3.09%) ceased disclosure from the 2025 annual report onward—the halt of disclosure of this core share metric itself is noteworthy. Top-five client revenue share <3%, no concentration issue; goodwill of RMB 4.340 billion (from Minzu Securities) accounts for 8.2% of net assets and has been a recurring key audit matter for years (see risk chapter for details).
Consistency between words and deeds: pragmatic, partially delivered. The company's operating plans are all qualitative statements with no quantified guidance, and there is no record of high-profile promises falling through. Three comparisons: 2025 plan "upgrade wealth management services, expand scale" → client assets +32.63%, surpassing RMB 1 trillion, brokerage net income +43.95% (delivered); "maintain stable investment and trading returns" → FY2025 investment and trading segment revenue −14.29%, proprietary income fluctuating from RMB 1.349 to 2.095 billion (not fully delivered); 2026 plan "deepen non-directional equity positioning" → H1 investment and trading segment operating margin 87.96% (+3.46pp), profit contribution 42.3% (partially delivered). Audit opinions from EY have been clean (unqualified) consecutively.
Shareholder friendliness: clear improvement. Payout ratio rose from 8.8% in FY2023 to 40.0% in FY2024 and 30.1% in FY2025 (three dividends in one year, a first since listing), plus a 2026 interim dividend of RMB 510 million; the three-year plan institutionalizes the dividend center. Zero buybacks over the past three years, but also zero refinancing and zero dilution (total share capital unchanged at 8.232 billion shares)—for a broker with 8% ROE, retaining earnings to expand the balance sheet via margin financing and proprietary trading is a reasonable use; judged shareholder-friendly (dividend dimension) + neutral (capital deployment dimension).
Risk signals: ① The biggest words-deeds gap lies at the controlling shareholder level—Ping An's non-compete commitment has been unfulfilled for years (see C3); ② governance changes have been frequent but direction is normal: abolition of the supervisory board in Nov 2025 (functions transferred to the Audit Committee), board expanded from 9 to 12 seats, sixth board election in July–August 2026, independent directors nominated by New Founder Holding, executive committee head change from He Yagang to Jiang Zhijun—management restructuring following the ownership transition is essentially complete; ③ dense asset-disposal moves: since 2025, sold 49% stake in Credit Suisse Securities (RMB 885 million), 300 million shares of Shengjing Bank (RMB 435 million), Zhengzhou Yuda International Trade (RMB 730 million, transferred Jul 2026, RMB 642 million received), cumulatively recovering ~RMB 2 billion; management states "repairing the asset side and lowering financing costs"—corresponding to the RMB 474 million disposal gains in FY2025 non-recurring items.
| Segment | Revenue share | Segment margin | Revenue YoY | Business logic in one line |
|---|---|---|---|---|
| Wealth management (brokerage + margin financing + distribution + futures IB) | 73.7% | 45.71% | +36.72% | Channel + spread business, capturing trading-value beta; share and commission rates determine elasticity |
| Investment and trading (proprietary) | 20.4% | 80.63% | −14.29% | Capital-heavy, high-margin; mix of directional and market-neutral strategies, most volatile |
| Asset management | 5.2% | 2.72% | +307.54% | Founder Fubon mutual funds RMB 87.2 billion + brokerage asset management RMB 41.4 billion, still around breakeven |
| Investment banking | 1.2% | 59.85% | New basis | Mainly bond underwriting (RMB 16.2 billion); equity business shrinking, subsidiary loss-making |
| Other/headquarters eliminations | −0.5% | — | — | Back office and unallocated costs; segment loss of −RMB 578 million |
Profit engine is wealth management: segment profit RMB 3.540 billion, 74.1% of total segment profits (proprietary RMB 1.725 billion, 36.1%; the two sum to >100% due to headquarters elimination losses)—revenue share 73.7% and profit share 74.1% are roughly matched; Founder's profit structure mirrors its revenue structure, meaning profits are equally tied to trading value. Segment margins vary widely (proprietary 80.63% vs asset management 2.72%, a gap of nearly 78pp): proprietary is a gross-profit concept on the firm's own capital with almost no direct costs; asset management scale remains small, with management fees insufficient to cover operating costs; wealth management's 45.71% reflects commission-sharing and branch cost structure of the channel business. The IB line's FY2024 segment revenue was once negative (Founder Underwriting net loss of RMB 607 million), recovering to RMB 167 million in FY2025 but falling −33.58% again in 2026H1—the only one of the five lines in secular decline, consistent with the industry pattern where IPO gains are captured by top players.
Accounting red flags (with source evidence):
Cross-period consistency: Investment income vs fair value changes—management explanation and data direction are inconsistent (FY2024 cited "increased financial asset returns," FY2025 cited "decreased returns"; the line-item basis swap cannot be verified); credit impairment direction—explanation consistent; operating cash flow/net profit persistently below 0.8—structural distortion typical of brokers, explanation consistent; abnormal Q4 quarterly profit share—FY2025Q4 ex-one-offs −RMB 172 million (Q4 only 4.3% of full-year profit), with expenses and impairments concentrated at year-end; company has not explained. FY2024 non-recurring loss of −RMB 585 million (investment property fair value losses) made ex-one-offs profit (RMB 2.793 billion) notably higher than attributable profit (RMB 2.207 billion); the basis difference between ex-one-offs and attributable profit must be normalized year by year before comparison.
Conclusion: No systematic financial fraud signals found (clean audit opinions, credible revenue quality—FY2023–2025 other business income only RMB 21/32/57 million, with no industry-typical bulk-trading revenue inflation), but the combination of proprietary line-item offsetting + impairment rhythm + Q4 concentration makes quarterly profit predictability poor; the year-end "last push" earnings risk recurs every year.
Market data (anchor frozen at 2026-10-28 close): Price RMB 6.44, market cap RMB 53.015 billion, PB(LF) 1.00x (10-year low percentile; 10-year median 1.44x), PE(TTM) 11.7x (TTM attributable profit RMB 4.543 billion at a historical high range—elevated earnings base mechanically depresses the PE percentile, context only, not a headline signal); forward PE (FY2026E consensus EPS RMB 0.60) 10.7x; dividend yield (TTM) 2.25%. Average daily turnover ~0.4%–0.6% of market cap; liquidity normal.
Market-implied expectations: 1.00x PB under the Gordon framework implies the market requires "long-term sustainable ROE ≈ cost of equity" (~9–11%). Founder's actual trajectory is 4.7%→4.9%→8.0%→annualized 11.4% (super-volume environment); under neutral volume (RMB 1.8–2.0 trillion), we estimate only 7%–8%—the ROE required at the current price is ~2pp above neutral reality; expectations are elevated but not by much. Against 20 peers trading below book (below-book group implies "ROE persistently below cost of equity"), Founder stands at parity, above the below-book group: the market's tiered pricing is "neutral to skeptical"—neither a below-book discount nor much of a premium paid for consolidation optionality.
Three-tier value: Asset value (floor) = book value per share RMB 6.41 (including goodwill RMB 4.34 billion, 8.2%; full monetization questionable, reference only); EPV (zero growth, equity basis) = normalized attributable profit RMB 4.5 billion ÷ total shares ÷ cost of equity 10% ≈ RMB 5.47/share (range RMB 4.6–6.5; normalization bridge: FY2025 attributable RMB 3.970 billion excluding one-offs such as Credit Suisse Securities disposal +RMB 474 million → RMB 3.496 billion, plus 2026H1 realized RMB 2.957 billion, with linear adjustment for H2 volume falling from 2.7 trillion to 1.8–2.0 trillion and proprietary returns reverting to neutral-strategy levels); growth/consolidation option = current price − EPV ≈ RMB 0.97, ~15% of current price—the market is paying only for a thin option; the claim that "the market prices in zero growth" largely holds here, but the option is not zero. The current price is mainly supported by the asset floor (RMB 6.41), with EPV below it.
Three scenarios and odds (numbers consistent with scenario table):
| Scenario | Probability | Fair value range | vs current price | Core assumptions and swing factors |
|---|---|---|---|---|
| Bear | 30% | RMB 5.5–5.9 | −15% to −8% | Trading volume center sliding to RMB 1.5 trillion, ROE back to 5–6%, consolidation stalled or negative path, year-end impairments/goodwill eroding BPS; PB 0.82–0.88x |
| Base | 50% | RMB 6.7–7.2 | +4% to +12% | Volume easing moderately but holding at RMB 1.8–2.0 trillion, ROE 7.5–8%, attributable profit center RMB 4.2–4.8 billion; PB 1.0–1.08x FY2026E BPS (sector-relative pricing + dividend support; anchors: lower bound of sector PB range 1.10–1.30x in Q4, large brokers ~1.0x, peer PB-ROE interpolation; PE cross-check: RMB 4.2–4.5 billion × 12–13x ≈ RMB 6.6–7.1) |
| Bull | 20% | RMB 8.6–9.5 | +34% to +48% | Plan-level consolidation progress (Founder surviving as entity) + volume recovery above RMB 2 trillion, ROE 9–10%, attributable profit RMB 5 billion+; PB 1.28–1.42x. Sell-side median target price of RMB 9.9 lies above the upper end of this range—sell-side is more optimistic than we are |
Probability-weighted expected value ~RMB 7.0 (~+8.6% vs current price); the current price sits between the bear-case upper bound and base-case lower bound: odds slightly favor the upside but not decisively—a "downside-protected, upside-awaiting-catalyst" profile. Margin of safety (base-case fair value floor vs current price) ~+4%, thin.
House earnings forecast vs consensus: This report FY2026 attributable profit RMB 5.0–5.5 billion (revenue RMB 13.3–14.3 billion; H2 implied RMB 2.04–2.54 billion, +29% to +60% vs 2025H2's RMB 1.586 billion—low base + volume decline offsetting each other), FY2027 normalized RMB 4.0–4.8 billion; sell-side consensus FY2026 ~RMB 4.94 billion, FY2027 ~RMB 5.19 billion—we are slightly above consensus for 2026 (+1% to +11%) and below consensus for 2027 (divergence lies in volume sustainability and falling commission rates). Biggest swing item: Q4 standalone (2025Q4's ultra-low base of only RMB 171 million provides both YoY elasticity and a reminder of year-end provisioning seasonality risk).
Conclusion: fairly valued to slightly cheap. Assessing quality (leading mid-tier earnings conversion efficiency + institutionalized dividends) and price (10-year low PB percentile) separately: the price is not expensive, but not at "buy with eyes closed" deep undervaluation either—current price is slightly below base-case fair value with ~4% margin of safety; upside realization depends on two external triggers—confirmation of a volume center or consolidation completion—neither of which is controllable in timing.
1. Industry size: 2025 is a clearly strong earnings year for China's securities industry — per the Securities Association of China, 150 brokers posted revenue of RMB 541.171 billion (+19.9%) and net profit of RMB 219.439 billion (~+31%), a marked step up from 2024 (RMB 451.169 billion); the underlying driver is a systematic lift in trading volumes: 2025 A-share turnover of RMB 420.63 trillion (+63.2%), average daily stock turnover of RMB 1.70 trillion (+61.9%), average daily stock-and-fund turnover of ~RMB 2.05 trillion (+70%); after margin financing balance broke RMB 2.5 trillion in September 2025, it surpassed RMB 3 trillion for the first time ever on June 23, 2026 (21st Century Business Herald), then fell back to ~RMB 2.45–2.49 trillion in mid-October. Equity financing is recovering: 2025 A-share IPOs raised ~RMB 128.7 billion (nearly doubling YoY); in the first three quarters of 2026, 122 IPOs raised RMB 212.3 billion (amount +175% YoY, Deloitte data; full year expected to exceed 2025). In 2026 the boom persists but with decelerating and diverging internals: listed brokers' H1 net profit attributable to parent rose +49%, but quarterly results diverged from Q3 (among the first batch of Q3 reports, CITIC 9M26 +32.66%, East Money +30.89%, while some saw single-quarter declines); Founder Securities Research projects industry 9M26 +27% and Q3 single quarter about −9%.
2. Value chain and value distribution: Upstream is trading and settlement infrastructure (exchange handling fees / securities regulatory fees are regulator-set; brokers have no pricing power) and the funding side (interbank borrowing / corporate bonds / structured income certificates; top-tier firms enjoy significantly lower funding costs than mid-tier); midstream is brokers' five business lines — the 2025 industry revenue mix: proprietary investment income RMB 185.324 billion, 34% (largest source); net brokerage commission income RMB 163.796 billion, 30%; net interest income RMB 64.687 billion, 12%; underwriting and sponsorship RMB 33.711 billion, 6%; asset management RMB 23.887 billion, 4% — capital-intensive businesses (proprietary + credit) total ~46%, deeply binding industry earnings to equity and bond market beta; downstream is retail clients (paying commissions and margin interest), institutional clients (paying fund allocation commissions, with rates down from ~0.08% in 2021 to ~0.0365% in 2025; total allocation commission revenue at only half of 2021 levels), and issuers (paying underwriting fees). Founder sits in the midstream brokerage/intermediation chain: net brokerage income is ~48% of revenue (among the highest of A-share brokers), with ~4% market share of stock-and-fund turnover — the brokerage channel is oversupplied with homogeneous price competition, so "compensating falling prices with volume" is the only way out, and the profit center has systematically shifted to proprietary/capital-intensive businesses, precisely Founder's relative weakness (constrained by net capital).
3. Supply-demand and competitive structure: On the supply side there are 150 licensed brokers; new licenses are essentially frozen, and expansion relies mainly on balance-sheet growth (listed brokers' financial investment assets at ~47% of total assets, per 2025 Q3 reports) and M&A consolidation; 2024–2026 saw a dense wave of mergers: Guotai Junan + Haitong (approved January 2025, a RMB 1.7 trillion asset giant), Guolian + Minsheng, Zheshang + Guodu, Western + Guorong, CICC absorbing Dongxing + Xinda (disclosed November 2025 through settlement on October 26, 2026; consideration RMB 113.854 billion, the largest share-swap absorption in A-share brokerage history), Orient Securities acquiring Shanghai Securities (RMB 25.120 billion, review hearing October 29, 2026). Concentration hit record highs: in 2026H1 the top 10 accounted for 58.85% of industry revenue and 63.95% of net profit; in 2025 CITIC alone earned net profit of RMB 30.076 billion, roughly equal to the sum of the next 52 brokers. Barriers to entry: licenses (new issuance frozen; premium on acquiring existing licenses high), net capital (under new risk-control rules, capital strength caps business scale), customer switching costs (Founder's nearly 17 million clients / RMB 1 trillion client assets are years of accumulation), and investment banking reputation. Mid-tier competition is intense: commission rates, margin rates, and allocation commission rates are all declining; substitution threats come from internet platforms (East Money/Ant diverting the retail entry point) and bank wealth management / mutual funds (diverting household wealth).
4. Cycles and regulation: The industry is in the middle of an up-cycle (earnings realization phase), but deceleration and divergence began in 2026Q3. Leading indicators: average daily stock-and-fund turnover (31 trading days above RMB 3 trillion in 2026 vs 4 days in all of 2025), margin financing balance (2.83% of free-float market cap, still below the 2015 peak), IPO acceptance/hearing pace, mutual fund allocation commissions and new account openings. The regulatory stance is neutral-to-positive: ① M&A consolidation policy (the March 2024 "first-class investment banks" opinion targeting 2–3 internationally competitive investment banks by 2035; October 2026 remarks by Wu Qing plus the Securities Association's "Exemplary Practice No. 8" detailing the full absorption-merger process) favor names with merger expectations; ② new risk-control capital rules (effective January 2025, revised December 2025) bring all businesses under constraint, favoring well-capitalized prudent brokers (Founder's risk coverage ratio of 281.93% far exceeds the regulatory floor); ③ mutual fund fee reform and new commission rules (implemented July 2024, passive equity funds ≤0.0262%, others ≤0.0524%) remain a persistent headwind for brokerage/research/distribution lines — Founder's brokerage share of 48% gives it larger rate exposure than peers.
5. Peer benchmarking (FY2025 annual reports + market data as of 2026-10-28): see the valuation chapter charts. Key points: East Money is a platform model (net profit RMB 12.085 billion, ROE 14%, PB 2.78×), with traffic monetization efficiency far superior to the offline branch model — not directly comparable; Changjiang Securities' revenue is nearly the same scale as Founder's (RMB 10.548 billion vs 10.504 billion) but with ROE 10.02% and PB only 1.09× — its research business + regional depth contribute the ROE premium, making it Founder's most direct comp; Industrial Securities (ROE 4.9%, PB 0.84) and Zhongtai (net margin only ~12.6% vs Founder's 37.8%) are significantly weaker in profitability than Founder; Everbright, a central SOE of similar scale, has ROE 5.31%. Founder's net margin and ROE rank near the top of the mid-tier, yet its PB is middling — the PB-ROE ranking is broadly consistent with no significant mispricing, which is peer-level evidence of "reasonably cheap" rather than "deeply oversold."
6. The company's industry position: Among mid-tier brokers, Founder has the most distinctive "wealth management/brokerage-driven" profile, with stable-to-rising share (~4% stock-and-fund turnover share, slightly up; client assets +32.63%, outpacing the industry), but incremental gains are increasingly captured by leaders and East Money; the investment banking line is a clear weakness (weak capture of the IPO upcycle). Note on ranking basis: the company's exact industry rank by total assets/net capital was not obtained (parent net capital of RMB 35.730 billion is mid-tier); net brokerage income ranks among the leaders of the mid-tier; commission income market share was 3.09% in FY2024 (company annual report basis) and ceased disclosure from the 2025 annual report — margin financing share of 2.15% (semiannual report basis) has stagnated for two years; the company's own basis differs from the comparable association basis and both are shown side by side. Founder's true differentiating variable is its shareholder level: after the Ping An group took control, unresolved intra-industry competition with Ping An Securities (the "one participation, one control" constraint) makes it the only mid-tier name carrying an "integration option" — an option that is both valuation upside imagination and a source of uncertainty (see the brokerage-industry characteristics chapter).
Volume-price sensitivity (the business essence of the revenue side): Brokerage income is roughly 1:1 with turnover; margin interest is linear with balances; proprietary results float with markets. Stress tests based on 2026H1 annualized figures (attributable net profit ~RMB 5.91 billion, average daily turnover ~RMB 2.7 trillion) (this report): daily turnover RMB 1.8 trillion + margin −10% + proprietary yield −15% → attributable profit ~RMB 3.67 billion (−38%); RMB 1.5 trillion + margin −20% + proprietary −25% → ~RMB 2.60 billion (−56%); RMB 1.2 trillion + margin −30% + proprietary −35% → ~RMB 1.53 billion (−74%). Upside elasticity exists symmetrically: if volume climbs back above RMB 2 trillion, brokerage + interest income improves sequentially. Monitoring thresholds: monthly average daily turnover of RMB 1.8 trillion (holding = base case), RMB 1.5 trillion (breaking = bear case), RMB 2 trillion (reclaiming = recovery trigger).
Net capital and leverage: Parent net capital RMB 35.730 billion (2026-06-30, replenished annually by retained earnings); risk coverage ratio 281.93% (regulatory floor 120%) but down 28.4pp over six months; liquidity coverage ratio 218.38% (−60.5pp over six months); capital leverage ratio 17.21%; leverage excluding client funds rose from 3.78× to 4.29× over six months; interest-bearing debt RMB 148.5 billion (bonds payable RMB 56.9 billion, +25.3%; resale agreements RMB 58.6 billion, +37.8%). Rating AAA with smooth funding access; current metrics remain far from regulatory floors, but the expansion slope is steep — refinancing and impairment consumption are a medium-term constraint rather than a present risk.
Proprietary exposure (rates are the largest non-volume risk): Of RMB 123.6 billion in financial investments, bonds are ~58%; at end-2025, bond modified duration was 4.90 years with basis point value of RMB 33.34 million/bp; the company disclosed that a parallel 100bp rate increase → total profit −RMB 2.060 billion, owners' equity −RMB 2.525 billion (~52% of 2025 attributable profit); ±5% fair value moves in financial instruments → ±11.60% in net assets. 2026H1 fair value changes on other debt investments +RMB 0.249 billion (vs −RMB 0.696 billion a year earlier), with volatile OCI swings. In an inflation/supply-driven bond bear market, mark-to-market losses would erode both net assets and profits simultaneously, directly undermining the numerator side of the "1× PB floor."
Integration and "one participation, one control": Timeline — 2021: Ping An Trust issued its commitment letter to resolve intra-industry competition; CSRC approved the restructuring plan in December 2022, requiring a solution to be submitted within one year and rectification completed within five (market-reported hard deadline around end-2027); December 2023: Ping An Group said the plan had been submitted to relevant authorities; no public progress since, and the 2026 semiannual report still carries only the original commitment letter. Reference point: CICC's "three-in-one" took about one year from disclosure to settlement, and only 4 months from acceptance to delisting — once initiated, it moves fast, but the Founder case has been suspended for over four years with no official timetable. Paths run both ways: Founder survives (absorbing Ping An Securities) = major positive; Founder is absorbed and delisted or disposed at a discount = an unfavorable scenario with uncertain consideration. The shareholder register is clean (no unlock overhang; pledge 0.49%); integration is the sole equity-level variable.
Rating: Neutral | Confidence 0.50 | Time horizon 6–12 months. Founder Securities is currently a "floor in place, trigger absent" story: 1.00× PB (ten-year low percentile) + 2.25% dividend yield + book-value parity form a downside buffer, but the base-case fair value of RMB 6.7–7.2 implies only +4% to +12% from the current price with ~4% margin of safety, and 90.5% of earnings are tied to trading volume, which is in a downtrend — the risk/reward of buying is not bad but the win rate offers no edge; waiting for the trigger beats paying the option premium early. A historical calibration note: judgments that diverge widely from market anchors (the >30% target-price divergence bucket historically shows ~49% directional hit rate) warrant greater humility; this report's divergence from the sell-side RMB 9.9 target (~−30%) is essentially a disagreement over the volume center; convergence signals are noted above.
Actionable implications: Non-holders should wait, reassessing a move to positive when any one of three triggers is met — ① average daily turnover recovers and holds above RMB 2 trillion and margin balances stop falling; ② Q3 single-quarter attributable net profit ≥RMB 1.29 billion (matching or beating the industry's pessimistic anchor) with a positive proprietary line; ③ the Ping An integration shows plan-level progress favorable to Founder surviving. Holders: at RMB 6.44, near book value, no panic selling needed, but use RMB 5.5 (bear-case floor, ~0.85× PB) as the thesis-reassessment line; a break below signals the volume bear case materializing.
Risks and falsifiers (ranked by impact): ① volume center breaks below RMB 1.5 trillion (systematic earnings downgrades; attributable profit possibly down to RMB 2.6–3.7 billion); ② bond yields rise 100bp (net assets −RMB 2.5 billion, total profit −RMB 2.06 billion); ③ impairment of the RMB 4.34 billion Minzu Securities goodwill (8.2% of net assets; year-end is the concentrated test window); ④ adverse integration path (absorption/delisting or discounted disposal); ⑤ Cinda refiles and executes its sell-down plan (potential supply from ~7.2% holdings); ⑥ Q4 seasonal expense/impairment drag (precedent: 2025Q4 single-quarter non-recurring loss of −RMB 0.172 billion). Catalysts: Q3 report on 10-30, Q3 dividend in December, annual report and annual dividend in March 2027, the integration/rectification deadline window around end-2027, and new sector M&A cases (Orient Securities' acquisition of Shanghai Securities heard on 10-29).
This report was prepared based on the closing price of RMB 6.44 on 2026-10-28 (frozen anchor). Data sources: company 2023–2025 annual reports, 2026 Q1/semiannual reports, risk control indicator reports, Securities Association of China, Deloitte, Cailianshe, 21st Century Business Herald, etc.; all items marked "this report's estimate" are inferences based on public disclosure, not company guidance.