1–3Q18 results in line with expectation
1–3Q18 revenue fell 2.2% YoY to Rmb12.52bn, attributable net profitslipped 4.8% to Rmb4.48bn and ROAE dipped 0.64ppt to 4.88%. 3Q18net profit rose 5.2% QoQ to Rmb1.32bn （-22.9% YoY）。 Weak marketweighed on brokerage income, but income of all other businessesimproved QoQ.
Trends to watch
QoQ decline in brokerage income slower than market.
Net interest income rose 12% QoQ to Rmb687mn due possibly toimproving NIM for credit business.
Investment banking （IB） business solid.
Derivative business boosting investment income.
Asset management （AM） business expanding despite sectordownturn.
Earnings forecast
We maintain our earnings forecast.
Valuation and recommendation
HTSC-A/-H is trading at 1.3/0.8x 2018e P/B. Given the sectorvaluation recovery amid easing risk related to stock pledges, we liftHTSC-A/-H’s TP by 13% and 6% to Rmb20.82 （1.5x 2019e P/B and26% upside） and HK$15.78 （1.0x 2019e P/B and 29% upside）。 Maintain BUY on HTSC-A/-H.
Risks
Weak turnover; plunging market; sharper-than-expected exposure ofcredit risk.