HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China International Capital Corporation / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">CICC (3908 HK)</a> announced details of its merger, and as <a href="https://www.smartkarma.com/entities/dongxing-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:25320:1" rel="noopener">Dongxing Securities (601198 CH)</a> is valued higher, FY26F EPS dilution will be 8.5% on a weighted average basis.</li>
<li>Its post-merger FY26 and FY27 PERs are higher than the sector average, but given its rise to the 3rd largest H-share securities company, the premium can be justified.</li>
<li>Larger H-share securities companies have edged up since 19-Nov, which bodes well for CICC. We envisage a muted share price reaction, but long-term investors can build a position.  </li>
</ul>



CICC (3908 HK) announced details of its merger, and as Dongxing Securities (601198 CH) is valued higher, FY26F EPS dilution will be 8.5% on a weighted average basis.
Its post-merger FY26 and FY27 PERs are higher than the sector average, but given its rise to the 3rd largest H-share securities company, the premium can be justified.
Larger H-share securities companies have edged up since 19-Nov, which bodes well for CICC. We envisage a muted share price reaction, but long-term investors can build a position.  


<ul>
<li>China's securities industry is under a wave of consolidation. <a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">China International Capital Corporation (3908 HK)</a> is interesting given its leadership in the investment banking business.</li>
<li>A combination with <a href="https://www.smartkarma.com/entities/china-galaxy-securities-co-h" target="_blank" data-smartkarma-citation="entities:165:1" rel="noopener">China Galaxy Securities (H) (6881 HK)</a> may bring synergy, given their different focuses. This will create the 3rd largest securities house in China. </li>
<li>Even without a merger, CICC also looks attractive with the US interest rate trending down. It is best set to gain upon the revival of the Hong Kong IPO market. </li>
</ul>


China's securities industry is under a wave of consolidation. China International Capital Corporation (3908 HK) is interesting given its leadership in the investment banking business.
A combination with China Galaxy Securities (H) (6881 HK) may bring synergy, given their different focuses. This will create the 3rd largest securities house in China. 
Even without a merger, CICC also looks attractive with the US interest rate trending down. It is best set to gain upon the revival of the Hong Kong IPO market. 


<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">CICC (3908 HK)</a>'s announced merger with <a href="https://www.smartkarma.com/entities/dongxing-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:25320:1" rel="noopener">Dongxing Securities (601198 CH)</a> and <a href="https://www.smartkarma.com/entities/cinda-securities-company-limited" target="_blank" data-smartkarma-citation="entities:45389:1" rel="noopener">Cinda Securities (601059 CH)</a> will elevate it to the 3rd largest HK-listed Chinese securities company.</li>
<li>Based on our assumptions, its EPS will be diluted by 7.1%, BPS enhanced by 12.2%, and ROE lowered by 1pp for FY26, before accounting for synergy.</li>
<li>Its presence in Fujian (+616.7%), Liaoning (+500%), and Beijing (+100%) will be significantly enlarged. Additionally, it will open up potential benefits from optimisation.</li>
</ul>



CICC (3908 HK)'s announced merger with Dongxing Securities (601198 CH) and Cinda Securities (601059 CH) will elevate it to the 3rd largest HK-listed Chinese securities company.
Based on our assumptions, its EPS will be diluted by 7.1%, BPS enhanced by 12.2%, and ROE lowered by 1pp for FY26, before accounting for synergy.
Its presence in Fujian (+616.7%), Liaoning (+500%), and Beijing (+100%) will be significantly enlarged. Additionally, it will open up potential benefits from optimisation.


CICC (3908 HK): Initial Assessment of the Merger

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">China International Capital Corporation (3908 HK)</a>'s 1H25 positive profit alert is encouraging, with 1H25 results growing by 55-78% YoY.  </li>
<li>YTD, CICC has a 59.5% share of the HK IPO market. The solid H-share IPO pipeline of A-share companies is beneficial, as this is its major area of strength.</li>
<li>Market consensus has underestimated its FY25 earnings, inflating its PER multiples. The current 51% discount of its H-share to A-share is just too steep (average 37.7%).</li>
</ul>



China International Capital Corporation (3908 HK)'s 1H25 positive profit alert is encouraging, with 1H25 results growing by 55-78% YoY.  
YTD, CICC has a 59.5% share of the HK IPO market. The solid H-share IPO pipeline of A-share companies is beneficial, as this is its major area of strength.
Market consensus has underestimated its FY25 earnings, inflating its PER multiples. The current 51% discount of its H-share to A-share is just too steep (average 37.7%).


CICC (3908 HK): It Is the Best of the Time

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">China International Capital Corporation (3908 HK)</a>'s 2H24 net profit surged 33.6% in 2H24, reversing the downtrend in 1H24. It has benefited from lower staff and other operating costs. </li>
<li>Better 1Q25 market turnover and activities, more IPOs and placements and improved cost dynamics imply that the consensus forecasts are too conservative.</li>
<li>Its 0.55x P/B cannot adequately reflect better profitability. Despite the denial, CICC's potential merger with <a href="https://www.smartkarma.com/entities/china-galaxy-securities-co-h" target="_blank" data-smartkarma-citation="entities:165:1" rel="noopener">China Galaxy Securities (H) (6881 HK)</a> cannot be completely ruled out.</li>
</ul>



China International Capital Corporation (3908 HK)'s 2H24 net profit surged 33.6% in 2H24, reversing the downtrend in 1H24. It has benefited from lower staff and other operating costs. 
Better 1Q25 market turnover and activities, more IPOs and placements and improved cost dynamics imply that the consensus forecasts are too conservative.
Its 0.55x P/B cannot adequately reflect better profitability. Despite the denial, CICC's potential merger with China Galaxy Securities (H) (6881 HK) cannot be completely ruled out.


CICC (3908 HK): Underestimated by the Market

China

China International Capital Corporation Ltd. (CICC) operates as an international investment bank. The Company provides financial services, including investment banking, capital markets, securities sales and trading, fixed income, asset management, and private equity. China International Capital also offers individual wealth management and research services.

China International Capital Corporation (3908 HK)

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China International Capital Corporation (3908 HK)

CICC (3908 HK): Merger Details Are Out

CICC released merger details, facing 8.5% EPS dilution, but justified by the rise to the 3rd largest securities company. Share price reaction may...

Osbert Tang, CFA

CICC (3908 HK): M&A Possibility

CICC announced that it has entered into agreements to merge with Dongxing Securities and Cinda Securities, instead of the widely rumoured China...

Osbert Tang, CFA

CICC (3908 HK): Initial Assessment of the Merger

CICC's merger with Dongxing and Cinda will make it the 3rd largest Chinese securities company, with diluted EPS, enhanced BPS, and lowered ROE for...

Osbert Tang, CFA

CICC (3908 HK): It Is the Best of the Time

CICC is alerting a strong 1H25 profit growth, leading in the HK IPO market with a promising H-share IPO pipeline of A-share companies. The market...

Osbert Tang, CFA

CICC (3908 HK): Underestimated by the Market

CICC saw a 33.6% surge in 2H24 net profit, benefiting from lower costs. Market activities suggest the consensus is too conservative, and a...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CICC (3908 HK): Merger Details Are Out

​CICC released merger details, facing 8.5% EPS dilution, but justified by the rise to the 3rd largest securities company. Share price reaction may...

Osbert Tang, CFA

CICC (3908 HK): M&A Possibility

CICC announced that it has entered into agreements to merge with Dongxing Securities and Cinda Securities, instead of the widely rumoured China...

Osbert Tang, CFA

CICC (3908 HK): Initial Assessment of the Merger

​CICC's merger with Dongxing and Cinda will make it the 3rd largest Chinese securities company, with diluted EPS, enhanced BPS, and lowered ROE for...

Osbert Tang, CFA

CICC (3908 HK): It Is the Best of the Time

​CICC is alerting a strong 1H25 profit growth, leading in the HK IPO market with a promising H-share IPO pipeline of A-share companies. The market...

Osbert Tang, CFA

CICC (3908 HK): Underestimated by the Market

CICC saw a 33.6% surge in 2H24 net profit, benefiting from lower costs. Market activities suggest the consensus is too conservative, and a...

Osbert Tang, CFA

CICC released merger details, facing 8.5% EPS dilution, but justified by the rise to the 3rd largest securities company. Share price reaction may...

CICC's merger with Dongxing and Cinda will make it the 3rd largest Chinese securities company, with diluted EPS, enhanced BPS, and lowered ROE for...

CICC is alerting a strong 1H25 profit growth, leading in the HK IPO market with a promising H-share IPO pipeline of A-share companies. The market...