A recent research report from CITIC SEC indicates that technology finance is fundamentally reshaping the industry's profit model, supporting sustained performance improvements. By aligning with the macro cycle of IPO and refinancing recovery, focusing on the upgrade of the "investment, financing, and exit" closed-loop model, and selecting high-certainty, high-elasticity stocks in direct investment and strategic placements, the firm outlines two key investment themes. First, capitalizing on the high elasticity of major tech projects by prioritizing flagship stocks with deep positions in sub-sectors offering high growth potential. Second, focusing on versatile absolute leaders that will benefit from model upgrades for long-term gains.
Industry Trends: Technology finance is profoundly reshaping the securities industry's business model, with brokerages transitioning from traditional channel intermediaries to full-lifecycle partners in "investment, financing, management, and exit." As the "1+N" policy framework for capital markets aligns with the national science and technology strategy, improvements to the "invest-first, underwrite-later" policy and a reassessment of the follow-on investment mechanism are driving a surge in high-quality hard-tech asset supply. By forming a complete ecosystem of "project discovery, early investment, continuous service, and capital exit," brokerages are addressing the core issues of short service chains and high cyclical volatility in traditional channel businesses, unlocking revenue potential in long-term equity investments, fund management fees, underwriting fees, and post-listing comprehensive services.
Equity Underwriting: Annual equity financing is expected to reach one trillion yuan, with concentration accelerating under refinancing dominance. The report forecasts that total A-share financing in 2026 could reach one trillion yuan. At the IPO level, 78.67% of companies on the Sci-Tech Innovation Board and ChiNext are in the queue, highlighting a strong hard-tech focus. With new refinancing rules improving financing efficiency for tech companies and optimizing market liquidity, refinancing is projected to be the primary channel for equity financing over the next 1-2 years. Refinancing demands high pricing and sales capabilities, driving incremental business toward leading brokers with strong capital intermediation and project reserves. In the first half of 2026, the top three underwriters captured 58% of equity underwriting fees, a trend expected to further concentrate in the future.
Placement and Follow-on Investments: In the second quarter of 2026, follow-on investment gains exceeded 6 billion yuan, with leading firms maintaining a dominant advantage in project depth. Benefiting from sustained tech market trends and improved new stock performance, gains from follow-on investments reached 6.355 billion yuan in Q2 2026, based on a linear realization of gains upon the lifting of lock-up periods. The report estimates that by the end of 2027, investment income from unrealized gains on locked-up projects will remain above 1.5 billion yuan per quarter, but long-term growth will depend on a recovery in primary market issuance and a steady pipeline of new projects. Leading securities firms have a clear edge in the depth and stability of locked-up project gains.
Direct Investment Realization: Direct investments are entering a realization window, with the ability to secure large positions in major tech IPOs becoming a key determinant of success over the next two years. Tech IPOs are entering a phase of dense realization, and leading institutions, through dual models of "alternative subsidiaries and PE subsidiaries," have built a solid base for earnings growth over the next two years. Among the 14 major tech IPO projects with fundraising exceeding 40 billion yuan currently in the queue, Guotai Junan Securities (with 9 projects) has established a leading position through broad sector coverage, while China Merchants Securities and Huaan Securities have secured substantial gains through deep positions in flagship projects like CXMT. The next four quarters are expected to see a sustained, stepped surge in overall earnings, driving changes in the industry landscape.
Business Synergy: The penetration rate of the "invest-first, underwrite-later" model is rapidly increasing, enhancing synergies within the investment banking business. This model is more prevalent on the Sci-Tech Innovation Board and is accelerating on ChiNext, with concentration among leading firms. Leading brokerages leverage their research and capital advantages to achieve high conversion rates, while smaller firms have lower participation. The deepening of this model reinforces the core barriers of the "investment, financing, and exit" ecosystem, accelerating the concentration of industry benefits toward leading institutions and solidifying the polarization of the industry.
Long-Term Outlook: Driven by systemic improvements in the refinancing system and the wave of tech companies going global, the securities industry is evolving from traditional channel intermediaries to comprehensive industrial capital service providers. Reforms like shelf offering and market-based pricing are extending the service cycle, shifting revenue from one-time underwriting fees to ongoing support. Additionally, the globalization of tech companies is creating demand for cross-border financing and currency hedging, expanding capital-based businesses like FICC and FX derivatives. Leading international brokerage firms have already upgraded their profit structures to a trading and capital intermediary model.
Risks: Risks include tightening of equity financing policies and slower issuance, significant corrections in the tech sector secondary market, delays in landmark large-scale tech IPO projects, and increased industry polarization leading to tail risks for smaller firms.
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