[ET Net News Agency, 21 August 2019] Goldman Sachs lowered its target price for DFZQ
(03958) to HK$4.21 from HK$7.25 and downgraded its rating to "sell" from "neutral".
The research house assumed a weaker A-share market performance in 2H, hence, it revised
down DFZQ's 2019 NPAT by 26% due to its higher revenue exposure to prop-trading business.
After the earnings cut, it views current 2019 P/E multiples for both DFZQ at demanding
levels, with the valuation higher than tier-1 brokers.
Goldman believes DFZQ's earnings are more volatile than its peers due to its higher
revenue exposure to prop-trading business which makes its earnings more sensitive to
A-share market performance.
It assumed a 0% index return for CSI300 in 2H, Goldman expects DFZQ to see the highest
earnings cut (-26%) within its covered brokers (-14%).
Goldman believes the exit of Citi from the JV - Orient Citi Securities (previously 33%
owned by Citi, 67% owned by DFZQ) in May 2019 could pose subsequent challenges for DFZQ's
IBD business due to potential personnel changes and any potential market concerns from the
exit of Citi. (KL)