High Trading Turnover Drives 45% Growth in East Money's 1H Net Profit, but 3Q Growth Is Expected to Slow

Overview

The report assesses East Money's 1H26 results and 3Q trends. The core conclusion is that the sharp increase in A-share trading turnover boosted securities brokerage and net interest income, driving first-half net profit above expectations. Although trading turnover declined quarter over quarter in 3Q and the year-over-year comparison base rose, potentially slowing earnings growth, limited proprietary trading exposure, online channel advantages and long-term market share expansion continue to support the Buy rating.

Core views

East Money reported 1H26 net profit of RMB8.1 billion, up 45% year over year and above BofA's expectation. Net profit grew 52% year over year in 2Q, accelerating further from 38% in 1Q, mainly because average daily trading turnover was higher in 2Q. Total A-share trading turnover reached RMB317.5 trillion in 1H26, with average daily trading turnover of RMB2.7 trillion, up 95% and 100% year over year, respectively. East Money has no large-scale underwriting business and has relatively low equity exposure in its investment portfolio, so it cannot directly benefit from IPOs and proprietary trading as some traditional brokerages do. However, the increase in trading turnover was sufficiently large to significantly boost its profit through trading-related revenue. The business breakdown shows that, as China's largest online brokerage, East Money was one of the main beneficiaries of higher trading activity, with securities brokerage revenue increasing 43% year over year. Growth in margin financing and securities lending balances drove a 59% year-over-year increase in net interest income, although lower yields offset part of the gain. Fund distribution revenue rose 47% year over year, showing steady improvement. Compared with traditional brokerages, the company maintains a smaller investment portfolio, and investment income declined 6% year over year. This structure limits the upside sensitivity of proprietary trading gains when the market rises, but it also reduces the risk that severe market volatility is transmitted to earnings through proprietary positions. Entering 3Q26, average daily A-share trading turnover fell to RMB2.6 trillion, below RMB2.9 trillion in 2Q. Meanwhile, the year-over-year comparison base for 3Q rose to RMB2.1 trillion in the same period of 2025, versus only RMB1.3 trillion for 2Q. The sequential decline in trading turnover and the higher year-over-year comparison base together imply that year-over-year growth in East Money's securities brokerage revenue is expected to slow in 3Q. Nevertheless, BofA believes its earnings visibility remains relatively high. Given its very limited proprietary trading exposure, the report states that the company is almost unaffected directly by recent market volatility. The medium- to long-term Buy thesis is based on industry growth and market share expansion. East Money operates a large online wealth management platform that primarily distributes public mutual funds and brokerage asset management products, and it is also one of China's early online discount brokerages. BofA expects the company to gain share from offline fund distribution channels and traditional brokerages by leveraging its substantial online traffic, professional content, user community and online trading services. Its relatively low reliance on offline branch expansion is also expected to generate operating leverage. Forecasts remain unchanged: adjusted net profit for 2026 to 2028 is projected at RMB13.867 billion, RMB15.374 billion and RMB16.940 billion, respectively; earnings per share is projected at RMB0.877, RMB0.973 and RMB1.07, respectively, corresponding to year-over-year growth of 14.7%, 10.9% and 10.2%. Regarding valuation, BofA uses the Gordon Growth Model, assuming a medium-term average ROE of 14.0%, a sustainable long-term growth rate of 4.0% and a cost of equity of 6.8%. This yields a target price of RMB30.00, which was set on March 20, 2026 and remains unchanged in this report, corresponding to 4.5x 2026 forecast price-to-book and 34x 2026 forecast price-to-earnings. Based on the share price of RMB18.91 stated in the report, the 2026 forecast price-to-book and price-to-earnings ratios are approximately 2.82x and 21.6x, respectively. BofA reiterates its Buy rating based on trading-turnover-driven near-term earnings growth and long-term market share expansion.

Analysis framework

The report first links first-half net profit growth to quarterly average daily trading turnover, then breaks down securities brokerage, net interest, fund distribution and investment income to identify each business's contribution to earnings. It subsequently assesses 3Q year-over-year growth based on changes in 2Q and 3Q trading turnover and the prior-year comparison bases, while comparing East Money's limited proprietary trading exposure with traditional brokerages. The long-term assessment focuses on market share expansion and operating leverage arising from online traffic, content, the user community and trading services, and finally uses the Gordon Growth Model together with forecast price-to-book and price-to-earnings ratios to explain the target price.

Methodology notes

• Industry/Sector Analysis Framework

  Trading Turnover Sensitivity Analysis

  The report uses total and average daily A-share trading turnover as the core drivers of trading-related revenue and assesses the growth direction of securities brokerage and net interest income based on quarterly trading levels and year-over-year comparison bases.

• Corporate Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  Operating Leverage of the Online Model

  The report believes East Money relies less on offline branch expansion, so costs need not increase proportionally when revenue grows with trading activity and market share, potentially creating operating leverage. Investment in technology, promotion and new businesses may weaken this effect.

• Valuation Method

  Gordon Growth Model

  The report derives the target valuation using a medium-term average ROE of 14.0%, a sustainable long-term growth rate of 4.0% and a cost of equity of 6.8%, and accordingly determines a target price of RMB30.00.

• Valuation MethodPB valuation

  Forecast Price-to-Book Cross-Presentation

  The report expresses the RMB30.00 target price as 4.5x 2026 forecast price-to-book and also presents the current price as corresponding to approximately 2.82x 2026 forecast price-to-book, illustrating the valuation level of the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• East Money (300059.SZ)

  Higher A-share trading turnover directly drives securities brokerage revenue and supports net interest income through increased margin financing and securities lending balances. The online wealth management platform also benefits from improved fund sales.

  Strengths

  Substantial online traffic, professional content, a user community and online trading services provide a foundation for customer acquisition and market share expansion. The company has relatively low reliance on offline branches and proprietary trading.

  Weaknesses

  The absence of a large-scale underwriting business and the relatively low equity exposure in its investment portfolio make it difficult to directly capture gains from IPOs and an upswing in proprietary trading. Net interest income is also partially offset by declining yields.

  Comparison

  Compared with traditional brokerages, East Money benefits more directly from active retail trading and the migration to online channels, but its smaller investment portfolio provides less proprietary income sensitivity, while market volatility also has a more limited impact on its proprietary trading earnings.

  Risks

  Weaker trading activity, intensified competition, lower commission rates, higher-than-expected technology and promotional spending, costs from new businesses and various regulatory changes could all reduce revenue or operating leverage.

Key data

• 1H26 Net ProfitRMB8.1 billionUp 45% year over year and above BofA's expectation
• Quarterly Year-over-Year Net Profit Growth1Q 38%; 2Q 52%Accelerated in 2Q due to higher average daily trading turnover
• 1H26 Total A-share Trading TurnoverRMB317.5 trillionUp 95% year over year
• 1H26 Average Daily A-share Trading TurnoverRMB2.7 trillionUp 100% year over year
• Major Business Revenue GrowthSecurities brokerage +43%; net interest +59%; fund distribution +47%; investment income -6%Trading-related revenue was the main source of first-half profit growth
• Quarterly Change in Average Daily A-share Trading Turnover2Q26 RMB2.9 trillion; 3Q RMB2.6 trillionDeclined quarter over quarter in 3Q
• Year-over-Year Comparison Base for Average Daily A-share Trading Turnover2Q25 RMB1.3 trillion; 3Q RMB2.1 trillionThe comparison base rose significantly in 3Q
• 2026 Forecast EarningsAdjusted net profit RMB13.867 billion; earnings per share RMB0.877Earnings per share is expected to grow 14.7% year over year
• Target Price Valuation AssumptionsMedium-term average ROE 14.0%; long-term growth rate 4.0%; cost of equity 6.8%Used in the Gordon Growth Model
• Target Price and Corresponding MultiplesRMB30.00; 4.5x 2026 forecast price-to-book; 34x 2026 forecast price-to-earningsThe target price was set on March 20, 2026 and remains unchanged

Impact & implications

The report believes East Money's near-term earnings remain primarily dependent on A-share trading activity and margin financing and securities lending balances, while lower trading turnover and a high comparison base in 3Q will reduce securities brokerage revenue growth. At the same time, its smaller proprietary investment exposure makes it less directly sensitive to short-term market volatility than traditional brokerages. Over the long term, it is expected to gain share from offline channels and traditional brokerages through online traffic, content, its community and trading services.

Risks

• Upside risks include stronger-than-expected A-share trading turnover, retail fund inflows or public mutual fund sales, which could lead to upward revisions to the earnings assumptions underlying the target price.
• If reductions in public mutual fund management fees and distribution fees are smaller than expected, revenue pressure on the fund distribution business may be less than assumed in the report.
• If the A-share market weakens over the medium term, both the online wealth management platform and securities brokerage business will be negatively affected.
• Intensifying competition could cause the online wealth management platform to lose share to Ant Group or Tencent, slowing subsequent revenue growth.
• If commission rates in the securities industry continue to decline, it may become more difficult for the company to gain market share from traditional brokerages.
• Technology and promotional investment may exceed expectations, resulting in weaker operating leverage than estimated in the report.
• Costs from new businesses such as venture capital, insurance and asset management may weigh on profit.
• Regulatory changes involving shareholders, business models, fees, customer acquisition through marketing, data privacy, cybersecurity, antitrust and employee benefits may affect operations.

What to watch

• Monitor whether average daily A-share trading turnover can recover from the 3Q level of RMB2.6 trillion.
• Monitor the net impact of growth in margin financing and securities lending balances and declining yields on net interest income.
• Monitor public mutual fund sales performance and the extent of adjustments to management fees and distribution fees.
• Monitor securities brokerage commission rates and changes in East Money's market share relative to traditional brokerages.
• Monitor the impact of investment in technology, promotion and new businesses such as venture capital, insurance and asset management on operating leverage.
• Monitor regulatory developments involving data privacy, cybersecurity, antitrust and online customer acquisition through marketing.