GF Securities: Maintaining CICC's (03908) “Buy” Rating Target Price of HK$28.43

The Zhitong Finance App learned that GF Securities released a research report stating that CICC (03908) is expected to return to its mother's net profit of 81.3/9.47 billion yuan in 2025-2026. Given that the average PB share center of the company was 1.1 times in 19-21, considering the rise in prosperity and the company's accelerated integration to release synergies, H shares were given a 1X PB valuation in 2026. The reasonable value is HK$28.43 per share, maintaining the “buy” rating for H shares. (HKD/CNY=0.93) (Unless otherwise specified, the currency unit for this report is RMB)

The main views of GF Securities are as follows:

In the short term, the integration plan supports stock price expectations, and the release of the merger process is beneficial to catalyze

Since 2023, the merger and acquisition process of the four listed brokerage firms has been resumed. From the start of the merger and the resumption of stock trading until the first regulatory review period, the pricing plan was underpinned, and integration and collaborative expectations favoured the upward trend in valuation compared to the industry, and then gradually returned to fundamental pricing. CICC's merger and acquisition kicked off the integration of “Huijin” brokerage firms. After resuming trading, it is still awaiting review by the exchange, the Securities Regulatory Commission, and consideration of outstanding matters by the board of directors and shareholders' meetings.

In the medium to long term, 1+1+1>3 helps CICC accelerate the construction of a first-class investment bank

(1) The customer base is growing, and the regional networks complement each other. CICC has a high-quality customer base, a wealth management service system from a buyer's perspective, and successful integration experience. After the merger, the number of business outlets rose to the third in the industry, and the scale effect and collaborative upgrading potential of the wealth management business are remarkable.

(2) Capital strength has been significantly enhanced, opening up room for increasing leverage. After the merger, the net assets ranking was raised to fourth place in the industry, and risk control indicators such as net stable capital ratios were more relaxed, opening up space for employment. Historically, with its ability to use watches efficiently, CICC has been able to maintain a high level of leverage. Currently, it still has a lot of room for improvement, and the level of leverage has been stable in the history of Cinda and Dongxing. In terms of estimated quarterly returns, CICC is stable and high, while Cinda Dongxing fluctuates (upward elasticity). Cinda Dongxing Equity has strengthened high-dividend investments and fixed income structures with large differences. After the merger, the pan-owned business is expected to have both high capital efficiency and flexible allocation flexibility while continuing CICC's customer demand capacity and international strategic leadership.

(3) The investment banking business extends the full cycle value chain of enterprise customer service and creates competitiveness for collaborative growth of non-performing assets. CICC has outstanding brand and international advantages, and has long maintained the first place among Chinese brokerage firms in serving Chinese enterprises in global IPOs and serving Chinese enterprises in overseas bond underwriting scale. The merger achieves superposition of scale and complementary functional strategies, and is expected to expand a new blue ocean of special assets and alternative investments.

Risk warning: Industry competition intensifies, policy reforms fall short of expectations, large market fluctuations, etc.