Open Source Securities: Maintaining CICC's (03908) “Buy” Rating CICC Discloses Plans to Swap Shares and Absorb Dongxing Securities and Cinda Securities

The Zhitong Finance App learned that Open Source Securities released a research report saying that maintaining the “buy” rating of CICC (03908), CICC has experience in integrating China Investment Securities. The bank is optimistic about the efficiency of the company's integration of Cinda Securities and Dongxing Securities. As customer resources and capital strength are significantly strengthened, the influence of international brands is expected to continue to increase. Looking ahead, market improvements are driving the recovery of the company's core businesses such as investment banking and derivatives. The boom in Hong Kong stock IPOs and the Federal Reserve's interest rate cuts are favorable to the high growth in overseas business. Combined with the release of mergers and acquisitions synergy effects, the company's net profit is expected to continue to rise high.

The main views of Open Source Securities are as follows:

Recent events

On the evening of December 17, CICC revealed plans to exchange shares and absorb the merger of Dongxing Securities and Cinda Securities. Stock trading has resumed since the opening of the market on December 18. Optimistic about synergy effects, moving towards a world-class investment bank with comprehensive strength. This transaction is an integration of Huijin's brokerage licenses under the same shareholder, directly increasing CICC's net assets by 56 billion dollars. Under the restrictions on large-scale refinancing of the brokerage firm, it can only be replenished through mergers, acquisitions and restructuring. The valuation of this merger and acquisition is relatively high, but the opportunity is rare.

The overall asset price of the acquisition was 2.29 times PB, a 14% premium over the current price

The A-share exchange prices for CICC, Dongxing Securities, and Cinda Securities are 36.91, 16.14, and 19.15 yuan/share. Among them, CICC and Cinda Securities were determined according to the average trading price of A-shares (without premium) for the 20 trading days before the pricing benchmark date after adjustment, and Dongxing Securities was determined by giving a 26% premium on the basis of the average trading price for the 20 trading days before the pricing benchmark date.

The share exchange ratio between Dongxing Securities and CICC is 1:0.4373, that is, every 1 shareholder of Xing Securities A shares can be exchanged for 0.4373 CCC A shares; the share exchange ratio between Cinda Securities and CICC is 1:0.518 8, that is, every 1 Cinda Securities A share can be exchanged for 0.5188 CICC A-shares.

The exchange price is 1.83, 3.05, and 1.76 times the PB of CICC's A shares, Cinda Securities, and Dongxing Securities (current PB is 1.73, 2.85, and 1.45 times). The overall price of the acquisition of Cinda Securities and Dongxing Securities was 2.29 times PB, and the consideration for the acquisition of assets was 14% higher than the trading day before the suspension of trading.

Optimistic about the synergy between capital, wealth management and investment banking

Net assets have been added significantly, and capital allocation efficiency has improved: based on simple addition of data from the three quarterly reports in 2025, after the acquisition, CICC's total assets/net assets reached 100,96/171.5 billion (7649/15.5 billion before the acquisition). The total assets/net assets ranking was raised from 6/9 to 4/4, and the net asset ranking increased significantly. Capital is expected to improve allocation efficiency. At the end of 2025Q3, the equity multipliers of CICC, Dongxing Securities, and Cinda Securities were 5.4/3.2/3.8 times, with capital leverage ratios of 12%, 29%, and 17% (regulatory warning line 9.6%). It is expected that the increase in leverage and capital business synergy will be obvious after the merger.

Wealth management: At the end of 2025H1, the number of sales departments of Dongxing Securities and Cinda Securities was 76 and 81, with 15/21 branches. At the end of 2024, CICC Wealth had 213 sales departments and 23 branches. With the expansion of the network, the number of customers is expected to increase. CICC Wealth buyers have leading investment capabilities. China's 50 series products, etc. empower high-net-worth customer service, which is expected to increase the average revenue of the sales department and unleash synergy effects.

Major investment banks: The shareholders of Dongxing Securities and Cinda Securities are leaders in the asset management field, and have rich experience in integrating bad assets and customer resources. After the merger, the company is expected to explore high-quality projects in the field of asset restructuring, make full use of investment banking, investment research and investment capabilities, and achieve an increase in service fees and investment returns. The strengthening of the company's investment banking personnel after the merger and acquisition is expected to enhance the company's comprehensive investment banking service capabilities, take root in China, and have a global layout.

Risk Alerts

The progress of mergers and acquisitions fell short of expectations; market fluctuations affected the company's performance.