On August 25th, China Renaissance released a research report stating that it maintains a "buy" rating on Futu, with a target price of $72.1, which represents a 46% upside from the closing price on August 24th.

China Renaissance pointed out the following highlights on FUTU:

• 2Q23 key operating metrics mostly beat, except trading volume. Despite the challenging 2Q23 market conditions, Futu’s key operating metrics mostly came in better than expectations, including strong new paying client acquisition (+41% QoQ), higher commission rate (+1.1bp QoQ), steady client assets and a slight MFSL balance pullback (-1% QoQ), even as trading volume fell 22% QoQ on low velocity. According to management, QTD trading velocity has already returned to the 1Q23 level.

• Japan: a new market to tap in 4Q23. Futu announced its wholly owned Japan subsidiary,  Moomoo Security Japan Corporation Limited, received official approval from Japanese  regulators to conduct brokerage and wealth management business via its online platform,  Moomoo. Futu plans to launch trading functions in 4Q23. It has operated Moomoo as a  pure information market data platform in Japan for the past six months, and the current  DAU-to-user ratio is ~15%, indicating a high engagement.

China Renaissance revise up their 2023E/ 24E/ 25E non-GAAP net profit forecasts by 8%/ 6%/ 4% and revise up their target price to US$72.10 from US$60.60 based on a target 2024E P/E of 15.0x (unchanged).

Risks

• Market downturn and reduced participation of retail investors.

• Intensifying competition.

• Tightening regulation on cross-border brokerage service.

• Slower-than-expected overseas expansion.