GF SEC released a research report projecting CICC's (03908) net profit attributable to shareholders at RMB8.13 billion and RMB9.47 billion for 2025-2026. Based on the historical average PB ratio of 1.1x for its H-shares from 2019-2021, and considering improving industry conditions and accelerated synergy realization post-integration, the firm assigned a 1x PB valuation for 2026, deriving a fair value of HK$28.43 per share. The "Buy" rating on H-shares was maintained (HKD/CNY=0.93).
Key insights from GF SEC: **Short-term**: The integration plan supports share price expectations, with merger progress likely to catalyze positive sentiment. Historical analysis of four listed brokerages' M&A processes since 2023 shows valuation premiums during early merger phases (from announcement to initial regulatory review), followed by gradual normalization toward fundamentals. CICC's merger marks the beginning of "Huijin-affiliated" broker consolidation, pending further exchange, CSRC approvals, and shareholder meetings.
**Medium-to-long term**: Synergies aim to accelerate CICC's transformation into a top-tier investment bank: 1. **Expanded client base and regional complementarity**: CICC brings high-quality client relationships, a buyer-centric wealth management framework, and proven integration expertise. Post-merger, its branch network will rank third industry-wide, enhancing scale and synergy potential in wealth management. 2. **Strengthened capital position and leverage upside**: Combined net assets will rise to fourth in the sector, with relaxed risk metrics (e.g., net stable funding ratio) enabling greater capital deployment. Historically, CICC has maintained higher leverage efficiency than peers, with further room for improvement. 3. **Investment banking extension and NPL synergy**: CICC leads in global IPO and offshore bond underwriting for Chinese enterprises. The merger combines scale with strategic capabilities, potentially unlocking growth in special assets and alternative investments.
**Risks**: Intensified competition, slower-than-expected policy reforms, and market volatility.
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