Hebei'S First IPO Securities Firm CAIDA Securities Nearly Cut Its Net Profit In The First Half Of 2020

Hebei's first listed securities company was born.

Recently, CAIDA securities IPO application has been approved by the China Securities Regulatory Commission. The listed company plans to issue no more than 500 million shares, and the total share capital of the company will not exceed 3.245 billion shares, which will become the 45th listed securities company in China.

As the only securities company under the Hegang group, CAIDA securities has already sprouted the idea of listing. In September 2016, the company started the listing guidance calculation, but only in the guidance stage, CAIDA securities "delayed" for three years, and the company did not complete the pre disclosure of listing until December 2019.

Rough calculation, so far, CAIDA securities has been listed for nearly five years. The long way of listing reflects the ups and downs of its operation and development.

Although it is natural for CAIDA securities to be listed, there are still some problems in CAIDA securities, such as relying on brokerage business, relying on Hebei provincial market and insufficient internal risk control. Affected by the equity pledge business, the net profit of CAIDA securities in the first half of 2020 decreased year-on-year, almost cutting back.

Regional securities companies rooted in Hebei

According to the data of CAIDA securities' prospectus, in the first half of 2020, CAIDA securities achieved a revenue of 1.056 billion yuan, a year-on-year increase of 7.63%, and a net profit attributable to its parent of 209 million yuan, a year-on-year decrease of 46%.

In terms of various businesses, driven by the overall improvement of the early capital market, CAIDA securities, like other securities companies, has also achieved a good harvest in its self operated business. In the first half of 2020, the revenue of this business reached 226 million yuan, accounting for 21.39% of the total revenue. In terms of credit business, investment banking business, asset management business and futures business, CAIDA securities achieved revenue of 156 million yuan, 116 million yuan, 21 million yuan and 83 million yuan respectively.

The brokerage business has been playing the role of "performance dairy cow" of CAIDA securities. From January to June of 2020, the revenue has reached 397 million yuan, accounting for more than 37% of the company's total revenue in recent years.

In fact, in recent years, the commission rate of securities brokerage business has been showing a downward trend, and the net commission rate of CAIDA securities brokerage business will drop from 0.579 ‰ in 2016 to 0.455 ‰ in 2020. In this regard, head brokers have transformed wealth management business to cope with the impact. CAIDA securities also said that it was promoting the relevant transformation and upgrading, but had not seen underwriting.

In addition, compared with other regional securities companies, CAIDA securities is more dependent on the local business. As of June 30, 2020, CAIDA securities has 93 securities business departments in Hebei Province, accounting for 82.30% of the total number of securities business departments. From January to June in 2017, 2018, 2019 and 2020, the company's net income of securities brokerage service fees and commissions from its business outlets in Hebei province accounted for 90.20%, 90.55%, 90.37% and 90.60% respectively, which shows the company's dependence on Hebei.

In addition to the dependence on brokerage business, especially in Hebei Province, the net profit of CAIDA securities has also fluctuated greatly in recent years. From 2016 to the first half of 2020, the company's net profit attributable to the parent company was 657 million yuan, 297 million yuan, 74 million yuan, 609 million yuan and 209 million yuan respectively, and the non net profit deducted by the company in each period was similar to the net profit attributable to the parent company. It is worth mentioning that in 2019, when the revenue of CAIDA securities increased by 24.14% year-on-year, the net profit attributable to parent company increased by 727.32% year-on-year.

Through a close look at the company's prospectus, we can find that the impairment loss and asset impairment loss are the reasons for the sharp fluctuation of the net profit of CAIDA securities. Take 2019 as an example, the company's impairment loss and asset impairment loss is - 115 million yuan, mainly due to the market situation is better, the value of the company's credit business collateral rises, and some stock pledge customers who originally made provision for impairment supplement collateral to the company.

However, CAIDA securities is not so lucky in 2020. Only from the perspective of the prospectus, the company has been involved in 7 cases of illegal equity pledge disputes. Among them, * ST stetai (000760), who stepped on thunder, was once punished for financial fraud and false statements and other major violations, and has been suspended from listing.

Two other listed companies, St bus (002188) and St Cody (002770), were also investigated by the CSRC for false statements and suspected violations of laws and regulations. The related impairment is difficult to recover for CAIDA securities. The related impairment also led to a 46% decrease in net profit attributable to the parent when the operating income of CAIDA securities increased by 7.63% in the first half of 2020.

Raising funds to seek counter attack path

Although the company still has many existing problems, the listing of CAIDA securities also means new opportunities for development.

CAIDA Securities said in the prospectus that it plans to use the funds raised by the IPO to consolidate traditional brokerage business, expand the capital allocation scale of capital intermediary business, appropriately increase the scale of securities investment business, increase the investment in asset management business, comprehensively enhance the business strength of investment banks, strengthen the compliance risk control ability and information technology system construction, and support futures Business development and other innovative business.

"At present, many brokerage business departments are not making money or even losing money, such as CAIDA securities business departments are concentrated in Hebei Province, the probability is reduced to cost departments." There are large securities companies in Beijing, senior securities industry personnel said.

CAIDA securities also said that the company's business outlets outside Hebei Province are less, the overall network layout is not reasonable. We will appropriately set up business outlets and speed up the construction of light and low-cost business departments and financial centers. At the same time, we should build a wealth management center and increase investment in financial technology.

"In fact, I think that CAIDA securities, as the only securities company in Hebei, is better to give full play to the advantages of regional securities dealers and business outlets, take over the bond issuance business in the region, and arrange more bond contractors in each business department." The above senior securities industry personnel in Beijing said.

In fact, CAIDA securities has been expanding its bond underwriting team recently, including bond contracting posts and contract posts in Beijing, Shanghai and Shenzhen, as well as bond issuance and sales director in Beijing. Before that, the company also recruited innovative business undertaking post, intermediate business Post and bond business team leader.

However, at present, the underwriting strength of CAIDA securities is still weak. According to the data released by the China Securities Association, the commission income of CAIDA securities in 2019 is only 72.51 million yuan, ranking 54th in the industry. The company's stock underwriting and recommendation business has also stagnated for many years. Only in 2017, the sponsor Dongguan Mingfeng Packaging Co., Ltd. obtained 1.5 million yuan of recommendation income, and in 2019, it obtained 18900 yuan of stock distribution income, and the rest of the years were "zero income".

Some people close to CAIDA securities disclosed to the 21st century economic report that the company actually put the debt underwriting business in the fixed income financing headquarters, and the investment banking business department was mainly responsible for the equity underwriting and recommendation business.

"It is also because CAIDA's equity business does not make money, and fixed income is more profitable. With different business cycles of stock and bond, bond underwriting and fixed income business are more short and fast, which are quite different from the underwriting and recommendation system of investment banks, and the assessment methods are also different. Therefore, many small securities dealers put bond underwriting in the fixed income department. " There are domestic small and medium-sized securities dealers in charge of fixed income business said.

However, this also reflects that the investment banking business of CAIDA securities is still weak. The company's prospectus also shows that the funds raised this time will expand the strength of underwriting business funds, supplement the risk reserves of investment banks, and increase the upper limit of underwriting scale for a single project.

It is worth mentioning that CAIDA securities also said that it would support the business development of the futures subsidiary and supplement the capital of CAIDA futures.

"The largest shareholder of CAIDA securities is Tangshan Iron and Steel Group, and then Hegang group. From the business of the parent company, its futures subsidiary has unique advantages in doing bulk commodities. As for CAIDA securities itself, the development of futures subsidiaries also helps the company to develop OTC derivatives business. " Said the senior securities industry personnel.

At present, OTC derivatives business has become the focus of competition among major securities companies. Many people in the securities industry believe that this emerging business is expected to become the "most profitable business" of securities companies.

"However, there is still a lack of on-site derivatives that can be used for hedging in China. If you want to develop OTC derivatives business, you must have sufficient professional accumulation. Otherwise, the lack of risk control ability will lead to huge losses, which will have a greater impact on small and medium-sized securities companies like CAIDA." The senior securities industry personnel pointed out.