Key takeaway

In 2025, the company achieved operating revenue of RMB 35.810 billion, a year-on-year increase of +6.83%; net profit attributable to shareholders was RMB 16.383 billion, up +6.72% year-on-year; net profit attributable to shareholders excluding non-recurring gains and losses was RMB 16.268 billion, surging +80.08% year-on-year; weighted average ROE was 9.20%. After excluding the one-time gain from the sale of AssetMark in 2024, the profitability quality of the core business has improved overall. Brokerage business revenue reached RMB 9.122 billion, up +41.50% year-on-year; the custody scale of non-money market funds exceeded RMB 209.9 billion. In investment banking, the number of approved convertible bonds, restructuring approvals, and the scale of public REITs all ranked first in the industry. Operating revenue for 2026-2028 is forecasted to be RMB 39.841/44.041/45.788 billion, representing year-on-year growth of +11.3%/+10.5%/+4.0% respectively. The corresponding dynamic P/B ratios for 2026-2028E are 0.76x/0.72x/0.68x. We maintain "Buy" rating on the company.

Event

On March 30, Huatai Securities released its 2025 annual report. In 2025, the company achieved operating revenue of RMB 35.810 billion, a year-on-year increase of 6.83%; net profit attributable to shareholders was RMB 16.383 billion, up 6.72% year-on-year; net profit attributable to shareholders excluding non-recurring gains and losses was RMB 16.268 billion, significantly increasing by 80.08% year-on-year.

Brief Analysis

Non-recurring net profit surged 80%, indicating significantly enhanced profitability of the core business. In 2025, the company achieved revenue of RMB 35.810 billion, a year-on-year increase of 6.83%; net profit attributable to shareholders was RMB 16.383 billion, up +6.72% year-on-year; net profit attributable to shareholders excluding non-recurring gains and losses was RMB 16.268 billion, up +80.08% year on year, with the core business profit growth rate ranking among the top tier of leading securities firms. The weighted average ROE reached 9.20%, remaining largely flat year on year. As of the end of 2025, the company' s total assets exceeded RMB 1 trillion, reaching RMB 1.08 trillion, a year on year increase of +32.31%; net assets attributable to shareholders were RMB 206.939 billion, up +7.96% year on year.

Wealth management business expanded comprehensively; high grow th in distribution custody validates the effectiveness of the buyer centric transformation. In 2025, brokerage business revenue reached RMB 9.122 billion, up +41.50% year on year, accounting for 25.73% of total revenue, solidifying its position as the larg est revenue source. Within this, securities trading agency income increased +49% year on year, and financial product distribution income increased +54% year on year. The year end margin financing and securities lending balance was RMB 186 billion, up +40% year on year, with a market share of 7.3%, an increase of 0.2 percentage points from the beginning of the year. The number of financial products under custody (excluding cash management products) reached 17,100, with a sales scale of RMB 673.256 billion; t he scale of fund investment advisory business was RMB 30.6 billion, showing significant year on year growth. According to AMAC statistics for the second half of 2025, the company's equity fund custody scale was RMB 143.2 billion, and its non money market fund custody scale was RMB 209.9 billion, while its equity index fund custody scale was RMB 137.3 billion, all ranking second in the securities industry.

The investment banking business leads in multiple metrics, with the transformation into an industrial investment bank showing significant results. In 2025, investment banking net income was RMB 3.099 billion, a year on year increase of 47.80%. Domestic equity underwriting scale was RMB 66.712 billion, up 22% year on year; convertible bond underwriting amou nt was RMB 11.222 billion, ranking first in the industry; the number of review based restructuring projects approved and the number registered with the CSRC both ranked first in the industry. In bond underwriting, the total underwriting scale across all pr oduct types was RMB 1.41 trillion, up 9% year on year; a cumulative 290 technology innovation bonds were underwritten, amounting to RMB 81.1 billion, a year on year increase of 132%. For public REITs, the company acted as financial advisor for 4 deals with a scale of RMB 11.6 billion, ranking first in the industry. In overseas business, Huatai Financial Holdings (Hong Kong) completed 22 Hong Kong IPO sponsorship projects, ranking third in the entire market; it participated in 8 of the top ten Hong Kong IPOs , assisting leading companies in biopharmaceuticals, intelligent manufacturing, new energy vehicles, and other fields to list in Hong Kong.

The asset management business underwent structural adjustment, driven by both mutual funds and securities asset mana gement. In 2025, asset management net income was RMB 1.798 billion, a year on year decrease of 56.64%, mainly due to changes in the consolidation scope following the sale of AssetMark. Huatai Asset Management's assets under management at period end were RM B 708.465 billion, a year on year increase of 27.36%. China Southern Fund's net profit in 2025 was RMB 2.705 billion, up 15% year on year, with non money fund AUM growing steadily. Although Huatai PineBridge Fund's net profit decreased by 38% year on year, its non money fund AUM remained among the industry leaders.

The proprietary investment yield improved, with the OCI strategy building a solid safety cushion. In 2025, proprietary investment operating revenue reached RMB 13.829 billion, a year on year decr ease of 4.63%. The scale of financial investment assets at year end was RMB 238.708 billion, a year on year increase of 8.33%. The company increased allocation to high dividend assets in the OCI account, and the scale of other equity instrument investments grew significantly compared to the beginning of the year, effectively smoothing performance volatility.

International business achieved high growth after excluding the base effect, with key breakthroughs in global expansion. In 2025, international busines s revenue was RMB 5.918 billion, a year on year decrease of 46.75%, mainly due to the high base from the sale of AssetMark in 2024; excluding this impact, international business actually increased by 23.82% year on year. Breakthrough progress has been made in global presence: The Japanese subsidiary completed its registration and establishment; the Singapore subsidiary obtained a Capital Markets Services license and SEBI FPI qualification in India; the US subsidiary secured membership as a lead underwriter for NYSE IPOs and qualification as a broker dealer for non US sovereign bonds. The global value chain system covering mature and emerging markets across Asia, Europe, and America has been further enhanced.

Shareholder returns continue to improve, with a di vidend payout ratio exceeding 30%. The company's total cash dividends for 2025 amounted to RMB 4.965 billion (tax inclusive), with a cash dividend of RMB 5.50 per 10 shares (including an interim dividend of RMB 1.50), representing 30.30% of net profit attr ibutable to the parent company's shareholders, maintaining a leading position among top tier securities firms.

Earnings Forecast and Valuation: Estimated revenues for 2026 2028E are RMB 39.841 billion / 44.041 billion / 45.788 billion, representing year on year growth of +11.3% / +10.5% / +4.0% respectively; estimated net profit attributable to the parent company's shareholders for 2026 2028E are RMB 18.982 billion / 20.701 billion / 22.379 billion, representing year on year growth of +15.9% / +9.1% / +8.1% respectively. The current stock price corresponds to PB ratios of 0.76x / 0.72x / 0.68x for 2026 2028. Considering the company's leading position in AI enabled digital transformation and the effectiveness of its global presence, we maintain "Buy" rating o n the company.

Risks:

Uncertainty in market price fluctuations: Capital market prices are influenced by various factors, including macroeconomic fluctuations, changes in the global economic landscape, and shifts in investor sentiment, all of which may lead to stock price movements and impact the valuations of brokers, insurers, and other financial institutions. The performance of the non banking financial sector is significantly affected by market prices and trading volumes.

Uncertainty in earnings forecasts: Securities firms and insurers' profitability is influenced by various factors, and forecasts related to industry valuation and performance carry inherent uncertainties. Additionally, intensifying competition within the se ctor may lead to deviations in earnings projections.

Technological updates and iterations: The rapid development of emerging technologies requires financial institutions to continuously adapt to technological changes. However, faster pace of technological updates also brings high R&D and talent training costs, potentially increasing operational costs in brokers and insurers. Additionally, technological innovation may further increase the uncertainties.