Xiangcai Co.,Ltd. recently released its first-quarter report for 2026, showing a 5% year-on-year decline in total revenue and a significant 51% drop in net profit attributable to shareholders.
The sharp decrease in Xiangcai Co.,Ltd.'s net profit was primarily due to a decline in the fair value change gains of financial assets held by its subsidiary, Xiangcai Securities, compared to the same period last year. In contrast, during 2025, the company's net profit surged by over four times year-on-year, largely driven by substantial growth in proprietary investment income. This indicates that Xiangcai Co.,Ltd.'s performance is highly dependent on businesses such as proprietary trading.
A key question arises: to what extent does Xiangcai Co.,Ltd.'s proprietary income stem from skill versus market conditions? How much is derived from alpha, and how much from beta? An analysis of the company's recent quarterly income statements reveals that its proprietary income is highly correlated with equity market trends. For instance, proprietary income skyrocketed by 227% quarter-on-quarter in Q3 2025, only to plummet by 83% in Q4 2025, and turned negative in the first quarter of this year. This pattern suggests that the company's proprietary income may be significantly reliant on beta exposure. Meanwhile, a proprietary team with strong alpha-generating capabilities could theoretically mitigate the impact of market volatility through diversified strategies such as long-short hedging, asset rotation, and volatility strategies.
In 2025, the A-share market overall recovered, with major indices recording substantial gains. The Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index rose by 18.41%, 29.87%, and 49.57% respectively, with several indices reaching new highs. Market activity rebounded strongly, with the average daily stock and fund trading volume on the Shanghai, Shenzhen, and Beijing exchanges reaching 1.98 trillion yuan, a 67% increase year-on-year. The securities industry experienced a broad recovery, with multiple core indicators showing significant improvement. The bond market generally exhibited a high-volatility震荡 pattern, with the CSI Aggregate Bond Index rising by 0.57%.
Amid the buoyant market conditions, most securities firms delivered strong performance, and Xiangcai Co.,Ltd. was no exception. The company achieved total operating revenue of 2.42 billion yuan in 2025, a 10.37% increase year-on-year. Net profit attributable to shareholders reached 464 million yuan, a substantial 325.15% surge. Its core subsidiary, Xiangcai Securities, reported operating revenue of 2.012 billion yuan under the financial enterprise reporting standard, up 21.94% year-on-year, and net profit attributable to shareholders of 530 million yuan, a significant 118.08% increase.
Interestingly, the net profit figures for Xiangcai Co.,Ltd. and its subsidiary Xiangcai Securities appear inverted.
Xiangcai Co.,Ltd. attributed its strong 2025 performance to the overall upward trend in the domestic capital market, active trading, significant growth in Xiangcai Securities' wealth management businesses such as brokerage, credit, and investment advisory, as well as proprietary trading. Other factors included an expected substantial reduction in losses from its associate company, DZH Ltd., and a decrease in financial expenses compared to the previous year.
However, by the first quarter of 2026, Xiangcai Co.,Ltd.'s net profit had declined sharply. Total revenue was 590 million yuan, down 5% year-on-year, while net profit attributable to shareholders was only 24 million yuan, a steep 50.98% decrease. The company attributed this to decreased fair value change gains on financial assets held by Xiangcai Securities, impacted by capital market fluctuations.
From the company's statements, it is evident that its performance is significantly influenced by market conditions. In 2025, Xiangcai Co.,Ltd.'s proprietary investment income was 527 million yuan, a 17.4% increase year-on-year. However, in Q1 2026, its proprietary income was approximately -62 million yuan, turning negative.
In other words, Xiangcai Co.,Ltd.'s proprietary investments recorded paper losses in the first quarter of 2026.
A deeper analysis of the quarterly proprietary income figures—1.7 billion yuan in Q3 2024, 510 million yuan in Q4 2024, 390 million yuan in Q1 2025, 930 million yuan in Q2 2025, 3.04 billion yuan in Q3 2025, 500 million yuan in Q4 2025, and -620 million yuan in Q1 2026—shows quarter-on-quarter changes of 415.15%, -70.00%, -23.53%, 138.46%, 226.88%, -83.55%, and -224%, respectively. This volatility closely mirrors the movements of the A-share market, such as the Wind All-A Index's surges of 17.68% in Q3 2024 and 19.46% in Q3 2025, and its high volatility in Q4 2024, Q4 2025, and Q1 2026. The near-synchronous movement of Xiangcai Securities' proprietary income with the broader market suggests a heavy reliance on beta.
Notably, Xiangcai Co.,Ltd.'s information disclosure quality has been consistently rated as Category C by stock exchanges for multiple years, placing it at the bottom among securities firms, as no firm has received a D rating. For example, in the 2024-2025 disclosure assessment, Xiangcai Co.,Ltd., along with Jinlong Co.,Ltd. and Pacific Securities, received a C rating, while others were rated A or B. Furthermore, while Tianfeng Securities and Huachuang Yunxin improved their ratings from C to B between the 2023-2024 and 2024-2025 assessments, Xiangcai Co.,Ltd.'s rating remained unchanged.
Despite a 325.15% increase in net profit attributable to shareholders to 464 million yuan in 2025, Xiangcai Co.,Ltd. chose not to distribute a annual cash dividend. The company cited its strategic development plans and future capital needs as reasons for this decision. It's worth noting that the company had implemented a share repurchase via集中竞价 totaling 35.7103 million yuan in 2025, representing 7.69% of its annual net profit.
Beyond proprietary trading, Xiangcai Co.,Ltd.'s brokerage business is also beta-driven. In 2025, brokerage revenue was 1.057 billion yuan, a 37.33% increase, accounting for approximately 44% of total revenue. This growth rate closely aligns with the roughly 62% increase in the average daily trading volume in the Shanghai and Shenzhen markets during 2025. Combined, proprietary trading and brokerage businesses constituted nearly 66% of Xiangcai Co.,Ltd.'s revenue base in 2025. The common characteristic of these two businesses is their high dependence on market conditions: favorable markets lead to dual-engine growth and soaring profits, as seen in 2025, while weaker markets result in significant profit volatility or even halving, with little buffer, as evidenced by the Q1 2026 performance.
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