Huachuang Securities: The securities business actively evolved in the first half of the year, and sector valuations are expected to usher in a substantial increase

The Zhitong Finance App learned that Huachuang Securities released a research report saying that the current core drive of the brokerage sector is the resonance repair of “historical undervaluation+high trading chassis+negative excess convergence”: the long-term valuation cycle of the sector is at an absolute historical low level, the margin of safety is solid and defensive attributes are outstanding; previously, the sector's margins of market failure reached a rare level in history. Currently, the right inflection point of negative excess convergence has been established, and there is plenty of room for subsequent increases; market activity remains high, driving the brokerage and credit business to continue to expand and increase Self-operated liquidity reserves, high cumulative performance in the first three quarters, and a clear background of prosperity, compounded by a tough science and technology innovation board It is a new growth pole built on the cash flow of technology projects and high capital growth on overseas platforms. The long-term profit center of the industry is expected to move upward, and sector valuations are expected to rise substantially.

The main views of Huachuang Securities are as follows:

The main business grew rapidly across the board, and profit in a single quarter reached a peak

Forty-two listed brokerage firms achieved total revenue of 363.78 billion yuan (yoy +44.4%), net profit of 155.15 billion yuan (yoy +49.2%), more than half of the brokers' net profit growth rate of more than 30%, and China Merchants, Huaan, and Zhongtai more than doubled; of these, net profit to mother in 26Q2 reached 94.3 billion yuan (yoy +81.9%, qoq +55.0%), the highest profit level in a single quarter in the past three years. By business, proprietary investment was the biggest profit winner and loser, totaling 168.75 billion yuan (yoy +50.2%); net brokerage revenue (90.73 billion yuan, yoy +55.4%) and credit business revenue (30.06 billion yuan, yoy +52.9%) resonated high; investment banking and asset management also achieved a steady recovery, and the leading Matthew effect continued to solidify.

The industry's leverage cycle begins systematically, and ROE returns to the double-digit platform

The 2026H1 listed brokerage firm is strongly willing to take the initiative to expand, and the average leverage ratio of the entire industry rose to 4.9x, breaking through the historical highs of 2015 (3.8x) and 2021 (4.2x). The leverage ratio of leading brokerage firms rose steeply to 5.4x (CICC 6.4x, Shenwanda 6.1x), and the leverage ratio of small and medium brokerage firms also broke the 10-year sideways trading range and rose to 4.0x. In a low interest rate environment, brokerage firms seized the window to issue corporate bonds of 813 billion yuan (yoy +150.3%, cost pressure reduction of 16 bps) and short-term financing bonds of 263.1 billion yuan (yoy +49.9%, cost pressure drop by 27 bps). Low-cost active debt greatly expanded the capital intermediation base; asset-side ROA recovered to 2.1%, driving the industry's annualized ROE to 10.4%, a record high of nearly ten years.

“Science and Innovation Follow-up Investment+Overseas Platform” go hand in hand to build a strong profit reservoir

The early market mostly viewed investment and overseas businesses as marginal additions, and the interim report has fully verified its transformation into a core profit pillar. Alternative investment and private equity subsidiaries have exploded. Cathay Pacific Haitong Zhenyu (net profit of 6.51 billion yuan) and China Merchants Securities Investment (net profit of 5.22 billion yuan) contributed as much as 32.1% and 49.1% to the group's profits, respectively. Alternative companies such as Changjiang, Dongzheng, and Huafu also broke through all; the Science and Technology Innovation Board has not lifted the ban and follow-up investment projects are highly concentrated in the three major hardware technology lines of electronics (18 companies), pharmaceuticals (9 companies), and machinery (8 companies), CITIC Construction Investment (64.7 billion yuan), and CICC (6) Leading companies such as 210 million yuan) and CITIC Securities (3.93 billion yuan) have abundant surplus reserves. Changxin Technology has verified the value of the “investment bank+investment” flywheel with similar standards. At the same time, overseas platforms have fully accelerated, driven by the recovery of the Hong Kong stock primary market and cross-border derivatives/FICC customer demand. CITIC Securities's international revenue exceeded 10 billion dollars (contributing 24.2% of the Group's profit), CICC International's profit contribution rate reached 46.1%, and overseas business entered the expansion stage.

High boom trading protects the performance base, which is a significant departure from extremely undervaluation and high negative overruns

The average daily market turnover in July and August of this year reached 2.7 trillion yuan and 2.3 trillion yuan respectively, and continues to be at the top of the historical rankings, providing a sufficient safety cushion for the cumulative performance of the first three quarters. However, in the secondary market, the sector has experienced a long period of stagnation. Since the beginning of 2025, the negative market surplus hit a rare bottom of minus 40% at the end of May this year, and there is still room for restoration of more than 20%; as of 2026/9/7, the net market ratio (PB) of the brokerage sector is only about 1.27 times, which is in the absolute low quantile range of 16.1% in the past ten years. The scissor gap between continued improvement in fundamentals and deep discount valuations is already in an extreme state, nurturing strong upward momentum to return to the mean.

Risk warning: Risk of declining market trading activity, risk of capital market reforms falling short of expectations, risk of large fluctuations in the secondary market, risk of falling short of expectations from science and innovation projects, risk of overseas exhibitions and overseas regulatory compliance risks.