Gf Securities Co.,Ltd. released a research report stating that, under the top-level design of building a financial powerhouse and creating first-class investment banks, the consolidation of brokerages under non-common control aligns with policy direction. Such integration is expected to set an example for regional synergistic consolidation within the industry, accelerating the optimization of the sector's competitive landscape. Currently, the brokerage sector is at a historically low valuation level. While external risk events amplify short-term volatility, the stability of Chinese assets creates room for allocation. The trend of incremental capital entering the market persists. With the construction of market-stabilizing mechanisms, a slow-bull trend is anticipated. Capital market reforms are opening up new business growth areas, highlighting the sector's allocation value, with potential for earnings-driven upside.
The main views of Gf Securities Co.,Ltd. are as follows:
The acquisition of Soochow Securities is progressing rapidly. On the evening of March 2nd, Soochow Securities Co.,Ltd. announced a trading halt related to a planned acquisition. On the evening of March 13th, the company released a plan for issuing shares and paying cash to purchase assets in a connected transaction. It clarified its intention to acquire an 83.77% stake in another securities firm through a combination of share issuance and cash payment. The issuance price was set at the average stock price over the 20 trading days prior to the pricing benchmark date, which is 9.46 yuan per share, representing approximately 1.1x price-to-book value. Trading in Soochow Securities and the target firm's shares resumed on March 16th. Subsequent steps require completing an audit and assessment of the target firm's value for the municipal authority, further board of directors review, shareholder approval, and obtaining regulatory approval or registration before implementation.
This move aligns with policy directives aimed at building first-class investment banks. It will help optimize the layout of state-owned financial assets within Jiangsu Province, deepen the firm's presence and business synergies in the Yangtze River Delta region, and further enhance the scale effects and collaborative capabilities of its securities business. A major shareholder of the target firm will become an important connected party of Soochow Securities, which is conducive to deepening strategic cooperation with local governments and industrial platforms, thereby expanding corporate client and government project resources.
Post-integration, Soochow Securities will strengthen its capital base and expand its client foundation, with comprehensive competitiveness expected to improve. By integrating the target firm's full-license comprehensive service capabilities in areas like wealth management, investment banking, asset management, and futures business, Soochow Securities can address its shortcomings in regional penetration and business synergy, thereby enhancing overall profitability and market competitiveness. Based on H1 2025 data, simple pro-forma calculations suggest that after the merger, Soochow Securities' rankings for total assets, net assets, operating revenue, and net profit attributable to shareholders would rise by 5, 4, 2, and 0 places to 17th, 16th, 18th, and 14th, respectively. By supplementing capital strength and optimizing profitability elasticity in areas like proprietary trading, the merger is expected to amplify profit growth momentum.
Furthermore, this transaction will propel Soochow Securities' strategic upgrade from a regional broker to a nationwide comprehensive financial group. As of March 13th, Soochow Securities had 29 branch offices and 126 sales departments, primarily located in Suzhou, Jiangsu, and Zhejiang. The target firm has 19 branch offices and 63 sales departments, mainly concentrated in Changzhou, Jiangsu, and Henan. This will help enhance the combined entity's network coverage and service density within the province. The Yangtze River Delta region possesses strong resource endowments and prominent economic vitality; post-integration, the company is well-positioned to further tap into the region's potential.
Under the top-level design of building a financial powerhouse and creating first-class investment banks, the consolidation of brokerages under non-common control aligns with policy direction and is expected to set an example for regional synergistic consolidation within the industry, accelerating the optimization of the sector's structure. The brokerage sector currently trades at historically low valuations. External risk events may amplify short-term fluctuations, but the stability of Chinese assets provides allocation opportunities. The trend of incremental funds entering the market remains intact. With the development of market-stabilizing mechanisms, a slow-bull trend is foreseeable. Capital market reforms are unlocking new business growth areas, highlighting the sector's allocation value, with potential for earnings-driven upside anticipated.
Risk warnings include uncertainty regarding post-merger integration effectiveness, risks associated with changes in industry policies, intensifying industry competition, and excessive market volatility.