Overall 1H17 results in line Net profit came in at Rmb2,993m, up 5% YoY. EPS wasRmb0.42 and BVPS was Rmb11.73. Overall, the company’s brokerage commissionincome and investment banking income dropped YoY, whereas asset management feeincome and investment income rose YoY, in line with our expectation. Shareholders’total comprehensive income totaled Rmb3,220m, a 101% increase YoY. The companyhad a net margin of 25% in 1H17 （25% in 1H16）， and an annualized ROE of 7.1%.
　　Brokerage business The company maintained its leading position in trading volumewith a market share of 7.87% in 1H17 （8.85% in 2016）， despite brokerage and advisorycommission income dropping 32% YoY. However, it has a strong online focus and has along-term strategy to develop into a comprehensive wealth management business byleveraging on its substantial client base. Its “ZhangLe Fortune Path” app has long beenranked the leading broker app in terms of monthly active users. We have a positive viewon the company’s long-term strategy in the wealth management business, but we hopeto see accelerated future integration of Assetmark into the company’s domestic/crossborderwealth management business.
　　Asset management In 1H17, the company’s entrusted assets in its collective assetmanagement business, targeted asset management business, and specialized assetmanagement business totaled Rmb995bn, a 16% increase YoY, or 8% HoH. Netincome from these businesses totaled Rmb1,098m, up 49% YoY. Managementindicated that about half of its asset management income was from management fees.
　　Equity financing, debt financing and financial advisory The company completed 18lead equity underwriting projects and an overall underwriting amount of Rmb26.7bn in1H17, ranking it fourth in the market （3rd in 2016）。 Its lead debt underwriting businesswas ranked sixth （7th in 2016） in terms of amount underwritten. In its financial advisorybusiness, the company moved up from third in 2016 to first in 1H17 in terms oftransaction amount. Overall, the company demonstrated that it is a competitive player inthe investment banking business.
　　Capital based intermediary business The balance of margin finance and securitieslending remained flat HoH in 1H17 with a market share of 5.8% （5.9% in 2016）， rankingit second （also 2nd in 2016）。 Pending repurchase balance in its stock-pledgedrepurchase business amounted to Rmb76.8bn, up 84% HoH.
　　Maintain Buy The company has maintained its leading position in the equity brokeragemarket, and has shown competitive strength in areas such as margin financing andsecurities lending, and asset management. It is currently trading at ~1.1x 2017E P/B. Asa leading player in China’s securities market, we believe the company is undervaluedfrom a long-term perspective. We have a positive view on its long-term strategy in thewealth management business. We maintain our Buy rating and target price ofHK$20.50, representing ~1.4x 2017E P/B.