CISI FIN: Initiates "Buy" Rating on Orient (03958), Optimistic About Company's Transformation in Fee-based Business Segment and Growth Potential

CISI FIN released a research report stating that Orient (03958) has outstanding self-operated business, actively promoting asset structure optimization, and optimistic about the company's fee-based business transformation to realize growth. It is expected that the company's net profit attributable to shareholders in 2025-2026 will be 43.52 and 46.08 billion yuan respectively, with a year-on-year increase of +29.9% and +5.9% respectively. It is the first time that the company is covered and given a "hold" rating. The main points of CISI FIN are as follows: Orient released its 2025 interim report. During the reporting period, the company achieved operating income and net profit attributable to shareholders of 80.01 and 34.63 billion yuan respectively, with a year-on-year increase of +38.9% and +64.0%; Q2 achieved operating income and net profit attributable to shareholders of 26.19 and 20.27 billion yuan respectively, with a sequential decrease of -51.3% and +41.2%, mainly due to a decline in revenue caused by changes in accounting policies; the weighted average ROE increased by +1.61 percentage points to 4.3% year-on-year, with operating leverage increasing by +0.1% to 3.74 times. Fee-based business rebounded, fund-based business accelerated revenue growth. On the revenue side, in the first half of 2025, the company achieved fee-based and fund-based business revenue of 28.86 and 50.58 billion yuan respectively, an increase of +16.3% and +57.6% year-on-year. Brokerage and investment banking drove the growth of fee-based income, while fund-based business continued to be the core driver of the company's profits. On the cost side, operating expenses increased by +16.5% to 3.775 billion yuan year-on-year, with an operating expense ratio of -9.23 percentage points to 47.2%, offset by a credit impairment loss of 0.04 billion yuan. Continued recovery in brokerage and investment banking, asset management advancing towards public offering transformation. In terms of fee-based business, in the first half of 2025, the company's brokerage, investment banking, and asset management net income were 13.71, 7.20, and 6.01 billion yuan respectively, a year-on-year increase of +31.1%, +31.6%, and -15.1% respectively. The brokerage business benefited from customer expansion and sales promotion, with 228,000 new customers and 24.5 billion yuan in assets introduced, an increase of +90% and +45% year-on-year respectively, public fund sales increased by +61.3%, leading to a significant increase in income. The investment banking business progressed simultaneously in equity and debt financing, with the number of equity financing projects ranking sixth in the industry, and bond underwriting total scale increased by +28.0% year-on-year, ranking ninth in the market. In terms of asset management, the effect of the transformation of Dongzheng Asset Management towards public offering was evident, driving overall assets under management to increase by +7.9% since the beginning of the year; the company also continued to deepen its involvement in public offering through its stake in Huobi Fund. As of the first half of 2025, Huobi Fund's management scale increased by +8.7% to 1.26 trillion yuan since the beginning of the year, with a continuous enrichment of product offerings. Diversified development of investment business assets, continuation of the trend of expansion. In terms of fund-based business, in the first half of 2025, the company achieved net interest income and investment business income of 4.62 and 45.95 billion yuan respectively, a year-on-year decrease of -33.4% and an increase of +82.7% respectively. The decline in net interest income was mainly due to the rise in interbank borrowing costs and the expansion of bond repurchase scale, which drove interest expenses on sold repurchase financial assets to increase by +16.4% year-on-year, putting significant pressure on interest income. The investment business continued to be prosperous, with investment income increasing by +67.6% to 39.65 billion yuan year-on-year, driven by dividends from investments in other equity instruments and gains from trading financial assets, increasing by +123.4% and +95.1% respectively year-on-year. In terms of the structure of financial assets, the company deepened the development of equity derivatives businesses. On one hand, it continued its strategy of high dividend allocation by adding stocks and equity assets to OCI accounts, increasing by a net of 14.06 billion yuan to 122.54 billion yuan since the beginning of the year, enhancing profit security; on the other hand, OTC derivative businesses rebounded, with the scale of derivative financial instruments increasing by +79.4% since the beginning of the year. Risk warning: Risks of significant fluctuations in the capital market, risks of macroeconomic slowdown, and risks of market share not meeting expectations.