Founder Securities Co.,Ltd. released a research report stating that the brokerage sector is expected to achieve high profit growth and improved Return on Equity (ROE) in 2025. In the first quarter of 2026, market trading volume and margin lending balances are projected to maintain strong growth, indicating continued fundamental improvement for the sector. As of the market close on April 3, 2026, the sector's static Price-to-Earnings (PE) and Price-to-Book (PB) ratios were at the 4th and 8th percentiles of their respective ranges over the past decade. It is advised to focus on investment opportunities arising from the divergence between the ongoing fundamental improvement and the sector's price performance. Stock selection should prioritize: 1) Leading brokers with high ROE and low PB ratios; 2) Local state-owned brokers with low PB ratios and strong motivation to enhance performance; 3) Companies with high profitability and valuation elasticity. The main views of Founder Securities Co.,Ltd. are as follows:

1. Performance Overview: Brokerage Sector Profit Surged 40% Year-on-Year in 2025, with Improvement Across All Business Lines In 2025, the brokerage sector's total operating revenue increased 32% year-on-year, while net profit surged 46% year-on-year. In the fourth quarter alone, operating revenue grew 4% year-on-year and net profit increased 10% year-on-year. All business lines showed improvement. Operating revenue breakdown is as follows: 1) Light capital business revenue rose 34% year-on-year, accounting for 47% of the total. Within this, brokerage commission income increased 44% year-on-year; equity financing rebounded significantly, driving investment banking revenue up 38% year-on-year. 2) Capital-based business revenue grew 30% year-on-year, accounting for 53% of the total. This includes investment income, which rose 25% year-on-year, and net interest income, which surged 49% year-on-year. The management expense ratio declined, and risk control indicators improved. The sector's management expense ratio for 2025 was 49.4%, down 7.4 percentage points year-on-year, with per capita salary growth significantly lower than operating revenue growth. Net capital grew by double digits by year-end, and the average capital leverage ratio was 20.9%, up 0.8 percentage points year-on-year.

2. Light Capital Business: Robust Growth in Retail Brokerage, Recovery in Equity Underwriting In 2025, revenue from brokerage, investment banking, and asset management businesses increased by 44%, 38%, and 8% year-on-year, respectively. Key indicators show: 1) The annual average daily stock and fund trading volume reached 2.08 trillion yuan, up 70% year-on-year, with public fund stock trading volume rising 41% year-on-year. 2) A-share IPO volume reached 130.8 billion yuan, surging 97% year-on-year, while the underwriting volume of bonds by brokerages increased 16% year-on-year. 3) By the end of the period, the asset management scale of securities companies grew 11% year-on-year, and ETF scale increased 61%.

3. Heavy Capital Business: Volume and Price Rise in Investment Business, Improved Structure of Credit Assets The sector's investment assets at period-end increased 17% year-on-year. Rising equity markets drove an improvement in the average investment return rate for the industry to 3.23%, up 0.35 percentage points year-on-year. In terms of investment allocation, there was continued increased allocation to Other Comprehensive Income (OCI) assets: the sector's OCI scale at period-end surged 61% year-on-year, raising its proportion of total investment assets to 10.1%. Trading equities increased 32% year-on-year, raising their proportion to 13.2% of investment assets. The sector's margin lending balance at period-end grew 48% year-on-year, with the estimated average margin lending rate at 4.76%, down 0.50 percentage points year-on-year; margin lending interest income for the reporting period increased 21% year-on-year. The stock pledge asset balance at period-end rose 9% year-on-year, but its share of total credit assets decreased by 2.2 percentage points to 7.6%. Funding costs declined: the sector's average liability cost was 2.45%, down 0.32 percentage points year-on-year. The interest-bearing liability balance at period-end increased 24% year-on-year, with borrowings and repurchase liabilities growing 16% year-on-year and accounting for 48% of the total.

Risk warnings include significant fluctuations in capital markets, tightening of macro liquidity, and a slowdown in the pace of household fund inflows into the market.