Damo: Maintaining CICC's (03908) “Gain” Rating Target Price of HK$32.8

The Zhitong Finance App learned that Morgan Stanley released a research report saying that CICC (03908) shares were exchanged and merged with Dongxing Securities and Cinda Securities on October 26, and the newly issued free circulation shares will be tradable from October 29; the company has announced that it will pay an initial interim dividend of RMB 0.26 per share, which means that the dividend ratio has risen to 25%, which is in line with the bank's basic expectations. The bank maintains CICC's “increase in holdings” rating with a target price of HK$32.8.

The bank expects that as the merger and integration progresses, CICC's dividend ratio will gradually increase to more than 30% in the future, and achieve a 13% increase in dividend per share in the first half of 2026. According to the bank, a higher dividend payout ratio will help offset the earnings per share dilution effect caused by the merger.

According to the report, the bank has a positive view of the synergy after the merger and is expected to further unlock the potential within the next 12 months. The company's net capital is expected to double after the merger, which will benefit capital-intensive stock trading, derivatives and main brokerage services. Earlier, CICC announced an injection of RMB 4.2 billion into its Hong Kong subsidiary.

Management said that as part of the merger, the company is seeking to increase high-margin loan balances and net interest income (depending on customer needs). The number of retail customers is expected to increase by about 50%, and branch coverage will increase by more than 80%. Management also pointed out that if the wealth management business efficiency of Dongxing Securities and Cinda Securities can be raised to a level comparable to that of CICC after the merger, it is expected to bring in potential revenue of 1.5 billion to 2 billion yuan. Currently, the wealth management integration work has been underway for several months.

On the risk side, the report argues that macroeconomic recovery is slower than expected, affecting stock market performance and investors' risk appetite, and that cross-border business is being dragged down by offshore market fluctuations. Upside risks include faster than expected macroeconomic recovery, cooling geopolitical risks, and stronger than anticipated IPO and subsequent financing activities.