Recently, the securities brokerage sector in the capital market has been bustling with activity.

Leading brokerages, Guotai Junan and Haitong Securities, have announced plans to reorganize significant assets, and the future merger is expected to create a behemoth securities firm.

Following the announcements, the share prices of several listed securities firms have hit their upper limits.

Guohai Securities, one of the first established brokerages in China with its headquarters in Nanning, Guangxi, was formerly known as Guangxi Securities Company.

It went public on the A-share market in 2011 through a reverse takeover of Guilin Jiqi Pharmaceutical Co., Ltd., and was subsequently renamed Guohai Securities Co., Ltd.

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In recent years, the company's stock price has been lukewarm, fluctuating around 3 yuan/share to 4 yuan/share.

The main business performance has been underwhelming.

Not long ago, Guohai Securities released its semi-annual performance report for 2024, but unfortunately, the first-half "report card" was disappointing.

In the first half of 2024, the company achieved a total operating income of 1.925 billion yuan, a year-on-year decrease of 7.33%; the net profit attributable to the shareholders of the listed company was only 143 million yuan, a significant year-on-year decline of 63.45%, placing its profit performance in the lower-middle range of the industry.

Looking back at past performance data, this mid-year report is the worst performance since 2019.

Currently, Guohai Securities' main business is divided into wealth management services, corporate financial services, sales trading and investment services, and investment management services.

According to the 2024 semi-annual performance report, the revenue performance of these main businesses is unsatisfactory, showing varying degrees of decline.

During the reporting period, the wealth management business, which accounts for the largest proportion of revenue, accounted for 28.49%, mainly including securities agency sales, financial product agency sales, investment consulting, futures brokerage, margin trading, and stock pledge repurchase, etc.

Its revenue was 548 million yuan, a year-on-year decrease of 9.37%, while its operating expenses increased by 47.42% compared to the same period last year, leading to a significant reduction in the operating profit margin to 8.74%.

Next, the investment management business accounted for 16.19% of the revenue, a decrease of 7.17% compared to the same period last year, which is also the largest decrease in proportion among the four major business segments, mainly including asset management business, public fund management business, and private equity fund business.

During the reporting period, its revenue was 312 million yuan, a year-on-year decrease of 35.76%, and the operating profit margin was 16.13%, a significant year-on-year decrease of 20.93%.

Since the 2021 mid-year report, its revenue performance has reached an inflection point, showing a continuous downward trend.

The most obvious decline in the main business is the corporate financial services business, which mainly includes equity financing, bond financing, and financial advisory services.

This year, regulatory authorities have tightened control over IPOs, leading to a significant decrease in both the number and the amount of funds raised compared to previous years.

Affected by this, the business revenue has plummeted to 15 million yuan, a year-on-year decrease of 67.74%.

However, the sales trading and investment business, which mainly includes securities proprietary trading, financial markets, small and medium-sized enterprise trading and investment, and alternative investments, has performed relatively well among the main business segments.

During the reporting period, its revenue was 248 million yuan, and thanks to a significant reduction in operating expenses compared to the same period last year, the operating profit margin reached as high as 81.61%, a slight increase of 6.55% compared to the previous year.

As the largest local securities firm in Guangxi and the only listed financial institution in the region, Guohai Securities has also had brilliant business performances in the past.

According to public information, among the 97 securities firms surveyed by the China Securities Association in 2016, Guohai Securities ranked 18th in investment banking business income, with a scale of up to 1.296 billion yuan.

The continuous breach of stock pledge contracts has been a concern this year, as the financial industry is under the spotlight of regulatory authorities, especially in the securities investment banking sector, which needs to shoulder the responsibility of being the "gatekeeper" of the capital market.

According to incomplete statistics, so far, the total number of penalties issued by regulatory authorities for securities investment banking business has reached 80, involving 34 securities firms.

Guohai Securities has also frequently received regulatory penalties this year.

In April 2024, the Jiangsu Securities Regulatory Bureau decided to issue a warning letter to Guohai Securities as a regulatory measure.

It was found that Guohai Securities failed to fulfill its obligations diligently during the continuous supervision process of Jintongling's non-public issuance of stocks in 2017, and the continuous supervision reports for the years 2017 to 2019 contained false records, and the release procedure of the continuous supervision reports did not comply with regulations.

Moreover, the Shenzhen Stock Exchange also gave disciplinary action to Guohai Securities Co., Ltd., Lin Ju, and Tang Bin for the aforementioned incident.

In addition to regulatory penalties, Guohai Securities also received lawsuits from seven financial institutions last year for the "Shengtong Bond" case, namely: Jin Yuan Shun'an Fund Management Co., Ltd., Shanghai Zhongneng Investment Management Co., Ltd., Guoyuan Securities, Minsheng Securities, Evergrande Life Insurance Co., Ltd., Galaxy Jinhui Securities Asset Management Co., Ltd., and Chuangjin Hengxin Fund Management Co., Ltd., with a total claim amount of up to 545 million yuan.

At the same time, according to the 2024 semi-annual report, in recent years, Guohai Securities has had more than a dozen disputes over stock pledge repurchase transaction contract breaches.

If the principal in these businesses cannot be smoothly recovered, it will face the challenge of asset impairment, which may erode the company's net profit.

Some industry insiders told "Investor.com" that "stock pledge business is one of the important sources of income for securities firms, which provide financing for customers.

However, this type of financing risk has characteristics of uncertainty and higher interest rates.

Once stock prices fluctuate and fall, and customers cannot supplement the pledge, they may be forced to liquidate, and during the liquidation process, the stock price may continue to fall, causing not only interest losses to securities firms but also potentially endangering the principal."

Therefore, Guohai Securities has made a prudent assessment of pending litigation cases and provided for expected liabilities in accordance with the "Enterprise Accounting Standards."

According to the semi-annual performance report for the first half of 2024, Guohai Securities provided for expected liabilities of 174 million yuan, an increase of 4.23% compared to the end of last year.

These litigation disputes undoubtedly also put pressure on Guohai Securities' future performance, and it remains to be seen whether under the leadership of Chairman He Chunmei and the newly appointed President Du Wan Zhong, Guohai Securities can emerge from this "gloom," and the outside world will be watching.