Capital Securities Corporation Limited recently submitted its Hong Kong IPO prospectus less than three years after its listing in A-shares, aiming to expand in H-shares.
The prospectus reveals total revenues of 9.116 billion Yuan for the years 2022 to 2024, whereas the A-share annual reports show a total of 5.933 billion Yuan for the same period, resulting in a discrepancy of 3.1 billion Yuan, with a variance rate between one-third to one-half.
In addition to total revenues, there are significant discrepancies in the revenue from specific business segments disclosed in the prospectus versus the A-share annual reports. However, the company has not made any corrections for accounting errors, nor has there been any substantial change in the scope of consolidation, leaving the reasons for such large revenue differences unclear. Is it due to variations in the application of accounting standards or other factors? This remains perplexing.
From a business perspective, Capital Securities heavily relies on investment business revenue, clearly exhibiting characteristics of "living off the market". Furthermore, the company has seen a significant decline in asset management income, and the profits from the wealth management segment have been negative for consecutive periods. In light of the pronounced Matthew effect within the brokerage industry, Capital Securities ranks 38th among the 42 listed brokerages in revenue and lacks distinct competitive characteristics. Thus, the necessity of a Hong Kong IPO comes into question.
The data from the Hong Kong prospectus indicates revenues of 2.536 billion Yuan, 2.979 billion Yuan, and 3.601 billion Yuan for 2022 to 2024, totaling 9.116 billion Yuan. Contrastingly, the A-share annual report numbers are 1.588 billion Yuan, 1.927 billion Yuan, and 2.418 billion Yuan, summing up to 5.933 billion Yuan.
For the period from 2022 to 2024, the accumulated total revenue discrepancy between the Hong Kong prospectus and the annual report amounts to 3.183 billion Yuan, with a variation rate between one-third to one-half.
Even for the first half of 2025, the revenue discrepancy remains substantial, with the annual report disclosing 1.284 billion Yuan and the Hong Kong prospectus revealing 1.855 billion Yuan, a difference of 571 million Yuan.
Aside from total revenue data, discrepancies also exist in the segment income reported by Capital Securities, particularly in asset management. The prospectus shows asset management income for 2022 to 2024 as 937 million Yuan, 793 million Yuan, and 1.282 billion Yuan, while the A-share reports reveal figures of 698 million Yuan, 559 million Yuan, and 909 million Yuan, with the differences amounting to 239 million Yuan, 234 million Yuan, and 373 million Yuan, respectively, representing variance rates of 34.24%, 41.86%, and 41.03%.
Additionally, other business segments also show large discrepancies between the Hong Kong prospectus and A-share reports. It is baffling that Capital Securities did not correct any accounting errors nor see substantial changes in its scope of consolidation—why such a large revenue difference persists remains unresolved.
According to the Hong Kong prospectus, Capital Securities' subsidiaries include Capital Futures, Capital Zefu, Capital Desheng, and Wangjing Private Equity (with Capital Desheng holding 51% of Wangjing Private Equity). The number of major consolidated subsidiaries disclosed in the report for mid-2025 exceeded those in the Hong Kong prospectus, suggesting that A-share annual report data should logically be greater, yet the reality is dramatically different.
Capital Securities’ heavy reliance on investment business raises questions about how to build distinctive competitive advantages. The breakdown of Capital Securities' business indicates a strong dependency on investment activities, with revenues reported as 683 million Yuan, 1.242 billion Yuan, 1.344 billion Yuan, and 960 million Yuan for 2022 to 2024 and the first half of 2025, accounting for 26.9%, 41.7%, 37.3%, and 51.8% of total revenues respectively. Since 2023, investment business has become its primary revenue source.
Analysts argue that proprietary investment is highly reliant on market conditions and suffers from severe homogenization. The significant proportion of this revenue source implies that the brokerage is significantly affected by market trends and poses challenges in establishing unique competitive advantages.
Moreover, further evidence supports Capital Securities’ deep dependence on investment business. By the end of the first half of 2025, proprietary investment assets (calculated as trading financial assets + debt investments + other debt investments + other equity tool investments + derivative financial assets) accounted for 68.57% of total assets, approaching 70%.
According to the calculation formula for proprietary investment income, which is investment net income + fair value changes - investment income from associates and joint ventures, Capital Securities reported a proprietary investment income of 873 million Yuan for the first half of 2025, constituting 67.98% of the total revenue, similarly nearing 70%.
In addition to being highly reliant on proprietary investment business, Capital Securities also faces challenges of small scale in operational performance. By 2024, its revenue of 2.4 billion Yuan ranked it 38th among 42 listed securities firms. The top five securities companies held a market share of 46.8% in 2024, while the top ten collectively accounted for around 70%, intensifying the Matthew effect. Leading brokerages build competitive barriers through capital strength and comprehensive service capabilities, continuously expanding their market shares while maintaining their dominant positions.
While some smaller brokerages may leverage regional advantages to sustain operations, this is not a long-term strategy. Establishing differentiated competitive advantages or pursuing mergers and acquisitions are viable paths for overcoming these challenges.
Capital Securities not only faces the reality of being "small and unattractive", heavily reliant on investment business, but it also suffers from a significant decline in the income from asset management, which should reflect differentiating characteristics.
The A-share semi-annual report reveals that Capital Securities achieved 253 million Yuan in asset management revenue for the first half of 2025, a decrease of 54.06% year-on-year. The company explained that this was largely affected by bond market conditions, leading to a significant reduction in excess performance compensation. The Hong Kong prospectus indicates that the firm earned only 402 million Yuan in asset management revenue for the same period, a year-on-year drop of 45.38%, and revenue share plummeted to 21.7%.
As for whether Capital Securities intends to break through via mergers and acquisitions, currently, brokerages controlled by Beijing state-owned enterprises include Capital Securities, First Capital, Beijing Securities, CITIC Construction Investment, and Financial Street Securities, among others. Given that mergers and acquisitions have become a new trend under current policies such as "one investor and one control", will Capital Securities opt for restructuring or mergers?
The prospectus states that strategic mergers among brokerages have become a new trend in the development of China's securities industry. For smaller firms, this consolidation trend pushes them towards a differentiated survival strategy, aiming to build unique value propositions in specialized fields and forming a layered, complementary ecosystem alongside major industry players. The ongoing industry consolidation has transitioned from merely expanding scale to achieving capability leaps. In the context of an evolving regulatory framework and deepening market mechanism reforms, mergers and acquisitions are crucial for tackling homogeneous competition and represent a key path for the industry to return to high-quality development that serves the real economy.
Transforming brokerage services towards wealth management is also a strategy for many smaller brokerages to break through. However, Capital Securities has struggled to effectively overcome previous performance peaks in its wealth management business, and it has experienced negative profits for two and a half consecutive years.
According to data from the Hong Kong prospectus, wealth management revenues were 707 million Yuan, 611 million Yuan, 619 million Yuan, and 333 million Yuan for 2022 to 2024 and the first half of 2025, consistently failing to surpass the 2022 peak in 2023 and 2024.
For the years 2022 to 2024 and the first half of 2025, the profits from the wealth management division reported by the company were 49 million Yuan, -94 million Yuan, -96 million Yuan, and -24 million Yuan respectively.
Given the modest revenue scale, the absence of differentiated competitive advantages, and the fact that many mid-to-large sized brokerages have not listed in H-shares (such as Guosen Securities, Guotai Junan, Zhongtai Securities, Guojin Securities, and Ping An Securities), the necessity of Capital Securities seeking a Hong Kong listing less than three years after its A-share listing becomes questionable.
Capital Securities indicates that the purpose of its Hong Kong IPO is to further enhance the company's capital strength and overall competitiveness, better integrate international resources, and increase its global influence.
However, in reality, Capital Securities has not disclosed any foreign revenues in its periodic reports, and most of its subsidiaries and investments are domestically focused, lacking overseas operational entities or assets.
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