GREATER CHINA Strategy Alpha Picks: May Conviction Call: Adding CR Beer, Crystal, Geely, Haier, Kuaishou, Ningbo Tuopu, Pinduoduo, Shenzhou, and Tencent to our BUY list, closing out SELL calls. INDONESIA Strategy Alpha Picks: Slight Outperformance In A Bear Market: Our picks are BSDE, TLKM, ACES, BBTN, CMRY, SIDO, JSMR and AKRA. MALAYSIA Strategy Alpha Picks: Well-Positioned For 1Q Results Season: Our April picks again beat the KLCI. May 24 picks: GENM, Inari, Mah Sing, MrDIY, MYEG, Press Meta...
CMB’s 1Q24 earnings were slightly below our expectations due to disappointing fee income and higher cost ratio, partly offset by strong trading gains and lower credit impairment. 1Q24 NIM performance beat our expectation with a 2bp qoq decline and we expect it to hit its bottom by 2024 if there is another round of deposit rate cuts. Besides that, asset quality remains largely stable. Maintain BUY. Target price: HK$44.00.
KEY HIGHLIGHTS Results China Merchants Bank (3968 HK/BUY/HK$34.95/Target: HK$44.00) CMB’s 1Q24 earnings were slightly below our expectations due to disappointing fee income and higher cost ratio, partly offset by strong trading gains and lower credit impairment. 1Q24 NIM performance beat our expectation with a 2bp qoq decline and we expect it to hit its bottom by 2024 if there is another round of deposit rate cuts. Besides that, asset quality remains largely stable. Maintain BUY. Target price:...
GREATER CHINA Results China Merchants Bank (3968 HK/BUY/HK$34.95/Target: HK$44.00) 1Q24: Earnings miss on muted fee income and higher cost-to-income ratio. China Resources Building Materials Tech (1313 HK/BUY/HK$1.34/Target: HK$1.83) 1Q24: Mixed bag of results; regaining cement market share. Foxconn Industrial Internet (601138 CH/BUY/Rmb24.52/Target: Rmb29.10) 1Q24: Margins miss likely due to product mix, AI business remains robust. Haier Smart Home (6690 HK/BUY/HK$27.10/Target: ...
GREATER CHINA Strategy Alpha Picks: April Conviction Calls: Adding AIA, Midea, Hansoh Pharmaceutical, Shenzhen Inovance and Trip.com to our BUY list, with SELL calls on BYD, EVE Energy, and Li Auto. INDONESIA Strategy Alpha Picks: Outperformance In Mar 24 and 1Q24: Our picks are ACES, BBTN, CMRY, SIDO, EXCL, MAPI, JSMR, CTRA, and AKRA. MALAYSIA Strategy Alpha Picks: Expanding The Variety Of Events Bets: Our Alpha Picks trounced the KLCI in Mar 24. Apr 24 picks: GENM, Inari, Mah Sing, MrDIY, MY...
CMB’s 2023 results are in line with its preliminary results. 4Q23 earnings beat on cost control, lower provisions and trading gains. Management indicated that they will maintain the dividend payout after lifting it to 35%. They also guided that it will be challenging for CMB to achieve positive earnings growth in 1Q24 amid the margin squeeze and tepid fee income. Maintain BUY. Target price: HK$44.00.
KEY HIGHLIGHTS Results BYD Company (1211 HK/SELL/HK$201.60/Target: HK$140.00) 4Q23: Earnings up 19% yoy but down 17% qoq, in line. Management guides for flat earnings in 2024. Maintain SELL. Target price: HK$140.00. China Mengniu Dairy (2319 HK/BUY/HK$17.08/Target: HK$22.50) 2023: Missed estimates on one-off loss; weak demand to persist in the near term. China Merchants Bank (3968 HK/BUY/HK$30.95/Target: HK$44.00) 2023: Rise to the occasion. Country Garden Services (6098 HK/HOLD/HK$5.27...
GREATER CHINA Results BYD Company (1211 HK/SELL/HK$201.60/Target: HK$140.00): 4Q23: Earnings up 19% yoy but down 17% qoq, in line. Management guides for flat earnings in 2024. Maintain SELL. Target price: HK$140.00. China Merchants Bank (3968 HK/BUY/HK$30.95/Target: HK$44.00): 2023: Rise to the occasion. Haidilao International Holding (6862 HK/BUY/HK$16.86/Target: HK$18.80): 2023: In line; revenue growth on higher table turnover in 2024. Midea Group (000333 CH/BUY/Rmb63.67 /Target: Rmb76.20): 20...
GREATER CHINA Strategy Alpha Picks: March Conviction Call: Adding CMB, COLI, CR Beer, Kuaishou and TUL to our BUY list, closing out SELL calls. INDONESIA Strategy Alpha Picks: Significant Outperformance In Feb 24: Our picks are BBTN, CMRY, SIDO, EXCL, MAPI, JSMR, CTRA, MYOR and AKRA. MALAYSIA Strategy Alpha Picks: Focusing On Earnings Momentum: Our Alpha Picks underperformed the KLCI in Feb 24 (-0.9% vs 2.5%). Mar 24 picks significantly feature companies with good earnings momentum. SINGAPORE...
The HSI and MSCI China rose 6.6% and 8.2% mom respectively in Feb 24, mainly contributed by heavy-weighted IT and consumer discretionary stocks amid strongerthan- expected policy easing, which led to improved market sentiment. We expect sentiment to remain positive in March, as further macro supportive measures should be unveiled during the Two Sessions. We are adding CMB, COLI, CR Beer, Kuaishou and TUL to our BUY list and closing out the SELL ideas.
The HSMBI has soared 8.5% ytd, riding on the tailwinds of valuation recovery and Central Huijin purchase. We opine that the subsequent valuation recovery needs to be further supported by fundamental improvements. However, the recent five-year LPR cut could continue to weigh on banks’ NIM and top-line growth. Banks’ asset quality remains stable, but the underlying vulnerabilities still persist. Maintain UNDERWEIGHT with CMB as our top pick.
The A-shares for China banks are outperforming their H-shares due to the widening yield gaps and buying momentum from the sovereign fund. However, our analysis suggests that the attractive valuation and dividend yield could improve H-shares performance in the near term. CMB is our top pick.
Against the backdrop of a slowing economy in China and prolonged margin squeeze, CMB’s earnings growth slowdown is expected to persist into 2024. However, we believe that the market may have fully priced in the earnings headwinds after its valuation was halved from its peak during the grace period. With its robust capital and ample provision buffers, CMB could be a safer bet among peers in this challenging environment. Maintain BUY with a lower target price of HK$40.00.
KEY HIGHLIGHTS Sector Catering Pick Haidilao in the near term on better operating leverage. Maintain UNDERWEIGHT. Update Alibaba Group (9988 HK/BUY/HK$69.75/Target: HK$102.00) 3QFY24 preview: Improving GMV and advertising growth bolstered by ad-tech upgrade initiatives. China Merchants Bank Co (3968 HK/BUY/HK$25.80/Target: HK$40.00) When the going gets tough, the tough get going. TRADERS’ CORNER Techtronic Industries (669 HK): Trading Buy range: HK$86.00-87.00 Hisense Home Appliances Group ...
CMB reported disappointing 3Q23 results with both revenue and profit missing our expectations, underpinned by sluggish fee income and lower trading gains. NIM squeeze improved in 3Q23 but management guided that the NIM level may further decline in 2024 and fee income growth is still under pressure due to the fee rate cut and volatile market. Maintain BUY with a lower target price of HK$45.00 to reflect our cautious stance on CMB to restore double-digits earnings growth in 2023/24.
KEY HIGHLIGHTS Strategy Small-Mid Cap Biweekly Pet food exports on track for recovery; beneficiary: Yantai China Pet Food. Results BYD Company (1211 HK/BUY/HK$246.20/Target: HK$630.00) 3Q23: Earnings up 82% yoy and 53% qoq, in line. Maintain BUY. Target price: HK$630.00. China Construction Bank (939 HK/BUY/HK$4.48/Target: HK$6.00) 3Q23: Results in line; earnings up 2.6% on lower credit costs. China Merchants Bank Co. (3968 HK/BUY/HK$30.30/Target: HK$45.00) 3Q23: Results miss; longer wait ne...
We expect CCB’s and CMB’s earnings to grow 3.4% and 6.7% yoy due to lower impairment despite NIM dilution and subdued fee income. Although household loans remained sluggish in August, early signs of an economic recovery indicate that the current policy easing measures may be gaining traction, potentially stimulating effective credit demand. Maintain MARKET WEIGHT. CMB remains as our top pick given its attractive valuation and compelling 6.4% dividend yields.
Chinese banks recorded a modest 2.7% earnings growth, primarily attributed to rising trading gains and reduced provisions, which counterbalanced the adverse effects of NIM compression and sluggish fee income. The sector's valuation has suffered in recent years due to market concerns on NIM compression and asset quality. At this point, the sector is trading at a fairly balanced valuation, with the attractive 7% yield offsetting the impact of NIM compression. Maintain MARKET WEIGHT.
In August, the PBOC lowered the 1-year LPR by 10bp to 3.45%, while surprisingly keeping the 5-year LPR at 4.20%. Additionally, the PBOC also allowed the repricing of existing mortgages to reduce mortgage borrowers’ financial burden. Against this backdrop, banks cut time deposit rates by a larger quantum to defend their NIM. All in all, the net impact of these rate cuts is minimal to banks’ NIM and earnings. Maintain MARKET WEIGHT. Top pick: China Merchants Bank.
CMB’s 1H23 earnings came in above our expectations, underpinned by lower provisions. Net interest income recorded a margin growth of 1.2% yoy as larger loan scale offset the NIM compression impact. Non-interest income remains a key drag on operating income due to the sluggish performance in wealth management income. Asset quality remains largely stable with the property risk exposure reaching its peak. Maintain BUY on CMB with a lower target price of HK$50.00.
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