Wanlian Securities: Securities reform deepens and transformation continues, and in the long run, the value reshaping of the industry can be expected

The Zhitong Finance App learned that Wanlian Securities released a research report saying that in the short term, the factors suppressing early valuations have weakened marginally, and securities sector valuations are still deeply deviating from fundamentals, and there is room for repair. In the long run, international business and sponsorship and investment will activate growth attributes, and the value of the securities industry can be expected to be reshaped. The bank believes that the capitalization of international business and investment banks has become a key fulcrum for raising the ROE center under the industry's heavy capitalization business model. At the same time, the transformation of traditional brokerage business to wealth management will help brokerage firms cope with the pressure of falling commission rates over many years and create incremental value. Optimizing the structure of proprietary assets and customer demand business development will reduce dependence on market trends and smooth cyclical fluctuations in performance. Overall, the securities industry is expected to not only usher in valuation repair, but also has room to reshape growth value under long-term logic.

The main views of Wanlian Securities are as follows:

2026Q1 performance review: year-on-year high growth, wealth management and investment are the core drivers

1) In the first quarter of 2026, 43 listed brokerage firms achieved a total adjusted operating income of 15.7 billion yuan (operating income - other business costs) of 15.7 billion yuan, an increase of 31% year on year, and net profit to mother of 60.8 billion yuan, an increase of 39% year on year (excluding negative goodwill of 8.5 billion yuan from Cathay Pacific Haitong's absorption and merger in 2025Q1). Leading brokerage firms generally performed well, while small and medium brokerage firms showed fragmented performance, and some institutions showed greater flexibility under a small base. 2) Brokerage, credit and investment businesses are the core sources of revenue growth. The brokerage business revenue of all 43 listed brokerage firms grew positively, contributing 41% of the total revenue increase of listed brokerage firms; revenue from the credit business contributed 20% to the revenue increase; the investment business declined in revenue share due to market fluctuations, but still contributed 19% to revenue growth. The performance of brokerage firms of different sizes was divided, and most leading brokerage firms achieved positive growth. 3) The operating leverage and concentration of the industry continues to increase, and leading brokerage firms have obvious advantages.

The technology finance system continues to improve, and the securities industry pattern is being reshaped at an accelerated pace

1) The “15th Five-Year Plan” planning system lays out the capital market reform route for the next five years. Since the beginning of the year, investment and financing reform measures have been intensively introduced, and the technology finance system has been built and improved at an accelerated pace. 2) Mergers, acquisitions and restructuring continue to heat up. The central bank system and local state-owned assets departments are advancing on both lines, and the restructuring of the industry is accelerating. At the same time, refinancing is frequent. Leading brokerage firms and regional brokerage firms are each focusing on international business investment business.

Industry outlook: Strong fundamentals, positive development of various businesses

1) Pan-wealth management business: Large brokerage firms benefit more from the development of quantitative private equity, expansion of high-quality growth targets, or further boosting stock base turnover; the balance of finance continues to rise, and credit business income is expected to continue to rise; the scale of public funds has reached a record high, the scale of brokerage asset management has risen steadily and slightly. At the right time for residents' savings and medium- to long-term capital to enter the market, there is room for wealth management business development. 2) Investment business: Financing side reforms catalyze business recovery. Investment banks and investment will promote the transformation of brokerage firms from traditional intermediaries to “value finders” and “industrial partners”, and project reserves+capital strength will build a first-mover advantage for leading brokerage firms. 3) Investment business: The stock and bond market provides a good exhibition environment. Self-operated OCI and fixed income trading accounts are expected to bring higher profit flexibility. 4) International layout: The industry has accelerated its international layout, and the top four are significantly ahead. Most of the top ten brokers' international subsidiaries have higher leverage and ROE than the parent company as a whole, which is an important gripper for improving profitability.

Market conditions and valuation analysis: There is a deep deviation between valuation and performance, and the margin of safety is high.

Risk factors: Major changes in monetary policy, international relations, geopolitics, etc.; sharp market fluctuations; macroeconomics falling short of expectations; capital market reform policies falling short of expectations; investment risks in international subsidiaries