Daiwa: Target price of HK$56.3 for initial “outperforming the market” rating for China Merchants Bank (03968)

The Zhitong Finance App learned that Daiwa released a research report saying that it covered China Merchants Bank (03968) for the first time, giving it a “outperforming the market” rating, with a target price of HK$56.3. The bank pointed out that China Merchants Bank is a leading retail bank in China, accounting for the highest share of non-interest income covered by it, and can provide profit resilience during the credit downturn cycle.

The report mentioned that China Merchants Bank is currently at 0.92 times its 2026 forecast market account ratio. Although it is 0.6 times higher than other H-share banks, it is still about a standard deviation of 1.1 times lower than its five-year average, reflecting the market questioning whether China Merchants Bank can maintain its profit advantage over its peers.

Despite this, Daiwa believes that China Merchants Bank's structured investment logic is still stable, its deposit business is difficult to replicate, and handling fee revenue is reaching an inflection point. The current valuation multiples still imply expectations that the return on shareholders' equity will weaken significantly. The bank believes this is too pessimistic.