#精品长文创作季#
Author / Avocado under the stars
Edit/Spinach's Starry Sky
Typesetting/Leeks under the stars
Last week, the entire A-share market was full of mourning. On January 22, the Shanghai Composite Index fell below 2,800 points and closed at only 2,756 points, a perfect interpretation of "there is no low, only lower".
In the face of the turmoil in the stock market, the China Securities Regulatory Commission held a meeting to emphasize that "we must make every effort to maintain the stable operation of the capital market". In addition, Pan Gongsheng, governor of the central bank, publicly stated that the People's Bank of China will cut the deposit reserve ratio by 0.5 percentage points on February 5 to provide long-term liquidity to the market by 1 trillion yuan.
With various bailout news, securities stocks recovered. After all, when the stock market is active, there is money to be made in securities stocks. On the 24th and 25th, Huaxin shares (600621) rose for two consecutive trading days.
Source: Oriental Fortune Network - Huaxin shares (as of January 26, 2024)
Although the stock price has risen, as a securities stock that has become a halfway house, Huaxin's core business has suffered serious losses, supported only by investment income, and the net capital (risk indicator of the securities company) is insufficient, financing is terminated, and business development is restricted.
1. From real estate to securities, is it really reborn?
Huaxin Co., Ltd. is a veteran listed company in Shanghai, and its actual controller is Shanghai State-owned Assets Supervision and Administration Commission.
Before 2017, Huaxin's main business was real estate development and self-owned housing leasing. However, the data shows that since 2014, Huaxin's revenue and profit have declined sharply year by year.
From 2013 to 2015, Huaxin's operating income was 1.117 billion, 597 million and 365 million yuan respectively, and the net profit in the same period was 296 million, 152 million and 113 million respectively.
来源:同花顺iFinD-利润表-营业总收入
Huaxin shares urgently need to find new growth points.
At this time, Huaxin Securities, a subsidiary of Shanghai State-owned Assets Supervision and Administration Commission, is doing business as well. Market data shows that in 2015, Huaxin Securities' revenue was about 2.2 billion, which was seven times that of Huaxin shares.
At the same time, in addition to the traditional securities company business, Huaxin Securities is also carrying out innovative businesses such as futures, alternative investment and direct investment. To develop, you need financing. Huaxin Securities has business, Huaxin shares have the status of a listed company (can provide a channel for capital replenishment), the two hit it off and began to reorganize.
After 2018, the real estate sales business was almost completely cleared. Huaxin Co., Ltd. has formed a revenue model based on securities business, supplemented by financial leasing business, small number of holding property management and other businesses.
However, can Huaxin shares really be reborn and usher in the second spring of growth?
The fact is that since 2020, the revenue growth rate of Huaxin shares has been slowing down. In the first three quarters of 2023, the year-on-year revenue growth rate will be about -20%. During the same period, the average year-on-year growth rate of the entire securities industry was about 5.27%. In terms of revenue, Huaxin significantly underperformed the industry average.
来源:同花顺iFinD-利润表-营业总收入
Second, the loss of major business, and the strong support of investment income
From the perspective of business structure, Huaxin's operating income mainly includes interest income and fee and commission income, and the special nature of the brokerage industry determines that investment income is also an important source of profit.
Fee and commission income and interest income are still the main ones, but these days, they are a bit weightless.
Source: Public Data Collation
First of all, from the perspective of income scale, in the first three quarters of 2023, Huaxin's handling fee and commission income and interest income decreased by 20.2% and 6.03% year-on-year respectively.
Secondly, after deducting investment income, the overall profit of Huaxin shares is also in the red. In the first three quarters of 2023, the loss amount will be as high as 80 million. In terms of trend, not only is it losing money, but it is also losing more and more.
Source: Collation of public information
It can be seen that in the past two years, Huaxin's profitability has actually been supported by investment income. But putting performance on investment income will inevitably be a shock. Moreover, judging from the data, compared with 2020, the investment income of Huaxin shares has declined significantly in the past two years, and the investment income is also strong.
Source: Straight Flush iFinD - Income Statement - Investment Income
Third, the net capital is low, and it is in urgent need of financing to make up
In addition to the poor performance of key businesses, another problem faced by Huaxin is low net capital.
The so-called net capital is a regulatory indicator specifically for financial institutions such as securities companies. For financial companies such as securities companies, financial assets are their main assets, and the biggest feature of financial assets is that their value fluctuates greatly. Net capital is a series of adjustments made on the basis of traditional net assets (= total assets - total liabilities) and fully considering the risk of value fluctuations, so as to obtain the company's most liquid and quickly realizable funds.
Source: Baidu Encyclopedia
However, according to the report of Huaxin Securities, as of the end of June 2023, the net capital of Huaxin Securities was only 5.977 billion yuan, which was only higher than the almost bottom-ranked Hualin Securities (002945) (at the end of June 2023, the net capital was 4.292 billion yuan), and the gap with other listed securities companies was even greater.
Source: Read the financial report
According to regulatory requirements, the net capital is low, and high-risk business is not allowed.
Low net capital means that the company's solvency and liquidity are poor, and innovative businesses cannot be developed in order to avoid risks. The risk is high, the return is high, and the low net capital puts a tight spell on Huaxin's business development. Solving the bottleneck is either to increase one's own profitability, or to raise equity financing. Clearly, financing is the most efficient way to do this by far.
In December 2022, Huaxin Co., Ltd. issued a fixed increase plan, which intends to raise no more than 4 billion yuan, which is intended to be used to increase capital to Huaxin Securities after deducting the issuance costs, so as to increase the capital of Huaxin Securities and supplement its working capital.
Source: Huaxin Co., Ltd.'s 2022 additional issuance prospectus
However, half a year later, in August 2023, the company announced the withdrawal of the application again. According to the company's explanation, the withdrawal of the private placement is based on the progress of the private placement, and comprehensively considers the adjustment of the issuance plan and the actual situation of the company. Based on Huaxin's current situation, there is a high probability that the progress is not as expected, and it is a helpless move. Financing withdrawal, expansion of new business can not be realized, traditional business is not profitable, Huaxin shares have been in a dead knot.
Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.