Guangfa Securities: Dongwu Securities Merger Progressing Rapidly, Securities Industry Structure Continuously Optimized

Guangfa Securities released a research report stating that under the top-level design of building a strong financial nation and creating a first-class investment bank, mergers and acquisitions among securities firms under different control are aligned with policy guidance. This will set a demonstration effect for regional industry collaboration and accelerate the optimization of the industry landscape. Currently, the securities sector is at a historically low valuation level. External risk events amplify short-term fluctuations, but the stability of Chinese assets opens up allocation space. The trend of incremental capital entering the market still exists, and a slow bull market is expected under the stabilization mechanism. Capital market reforms create room for business growth, highlighting the sector’s allocation value, with performance catalysts expected to be elastic.

Guangfa Securities’ main points are as follows:

Dongwu Securities accelerates the acquisition of Donghai Securities

On the evening of March 2, Dongwu Securities announced a trading halt regarding its planned acquisition; on the evening of March 13, Dongwu Securities released a plan for issuing shares and paying cash to purchase assets and related-party transactions, clearly intending to acquire 83.77% of Donghai Securities through a combination of share issuance and cash payment. The issuance price is set at the average stock price of the 20 trading days before the pricing date, at 9.46 yuan per share, approximately 1.1 times PB. Dongwu and Donghai stocks resumed trading on March 16. The subsequent steps include completing the valuation and assessment of Donghai Securities, which is owned by Changzhou, holding another board meeting for review, obtaining shareholder approval, and securing regulatory approval or registration before implementation.

Aligned with policies promoting the construction of a first-class investment bank, this merger helps optimize Jiangsu Province’s financial state-owned assets layout, deepens the Yangtze River Delta regional layout and business synergy, and further enhances the scale effect and collaborative capabilities of securities businesses. Changzhou Investment Group will become an important related party of Dongwu, facilitating strategic cooperation with local governments and industrial platforms, and expanding corporate client and government project resources.

Post-integration, Dongwu Securities will strengthen its capital base and expand its client foundation, potentially improving overall competitiveness

By integrating Donghai Securities’ comprehensive services in wealth management, investment banking, asset management, and futures, Dongwu Securities can address its weaknesses in regional deep cultivation and business synergy, thereby improving overall profitability and market competitiveness. According to data from the first half of 2025, a simple sum estimate shows that after the merger, total assets, net assets, revenue, and net profit attributable to the parent company will increase by 5, 4, 2, and 0 positions respectively, reaching 17th, 16th, 18th, and 14th place. Enhancing capital strength and optimizing profit elasticity from proprietary trading could amplify profit growth momentum. Additionally, this transaction will promote Dongwu Securities’ strategic upgrade from a regional securities firm to a nationwide comprehensive financial group. As of March 13, Dongwu has 29 branches and 126 business departments mainly in Jiangsu’s Suzhou and Zhejiang; Donghai has 19 branches and 63 business departments mainly in Changzhou, Jiangsu, and Henan, helping to improve network coverage and service density within the province. The Yangtze River Delta region has abundant resources and strong economic vitality, and post-integration, the company is expected to further tap into regional potential.

Under the top-level design of building a strong financial nation and creating a first-class investment bank, mergers among securities firms under different control align with policy guidance, setting a demonstration effect for regional industry collaboration and accelerating industry landscape optimization.

Currently, the securities sector is at a historically low valuation level. External risk events amplify short-term volatility, but the stability of Chinese assets opens up allocation space. The trend of incremental capital entering the market persists, and a slow bull market is expected under the stabilization mechanism. Capital market reforms create room for business growth, highlighting the sector’s allocation value, with performance catalysts expected to be elastic.

Risk warnings

Uncertainty in post-merger integration effects, industry policy changes, increased industry competition, and excessive market volatility.