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China Merchants Bank Co Ltd Class A 600036

Morningstar Rating
¥34.00 +1.10 (3.34%)
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Company Report

We Expect Marginal Improvement in Deposit Costs and Credit Quality for Chinese Banks

Driven by improved investor sentiment for China banks with stable dividend payments and a historic property rescue package introduced in May, the Hang Seng Mainland Banks Index rallied over 20% in the second quarter. But it pulled back sharply on profit-taking and investors’ concerns that the easing measures were not sufficient to turn around struggling property sales. H-shares of most China banks remain undervalued, with 2024 price/book modestly increasing to 0.2-0.5 times. Dividend yields remain attractive at 6%-8%. With A-share counterparts trading at a 35% premium to H-shares on average, we expect the regulators’ push for higher and more regular dividend payouts, as well as the expansion of eligible exchange-traded funds on Stock Connect, should gradually narrow the valuation gap for Chinese dual-listed banks. Amid sluggish economic growth in China with no major recovery in property sales and consumer spending anticipated in 2024, we prefer defensive state-owned banks, including China Construction Bank, or CCB, and Industrial and Commercial Bank of China, or ICBC, and leading retail-focused bank China Merchants Bank for stable dividends, strong capital returns, and better earnings visibility.

Price vs Fair Value

600036 is trading at a 346% premium.
Price
¥34.00
Fair Value
¥94.00
Uncertainty
Medium
1-Star Price
¥45.21
5-Star Price
¥67.70
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

CMB expected to add 15 million, or nearly 10% of its 160 million customer pool from 2021 to 2023. Its number of retail customers already surpassed its target, reaching 184 million by end-2022.

Bears

There remain plenty of uncertainties regarding how quickly the consumer confidence will recover after China's reopening.

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News

Trading Information

Previous Close Price
¥32.90
Day Range
¥33.0134.08
52-Week Range
¥26.9037.00
Bid/Ask
¥33.99 / ¥34.00
Market Cap
¥857.47 Bil
Volume/Avg
94.5 Mil / 68.0 Mil

Key Statistics

Price/Earnings (Normalized)
6.04
Price/Sales
2.68
Dividend Yield (Trailing)
5.80%
Dividend Yield (Forward)
5.80%
Total Yield
5.80%

Company Profile

China Merchants Bank, with headquarters in Shenzhen, was founded in 1987. The bank is China's seventh-largest listed bank by assets, with the largest distribution network among China's joint-stock banks. CMB's network has been expanding rapidly. Its outlets are located mainly in China's more developed areas, including the Pearl River and Yangtze River deltas. The firm has 18% and 82% of its shares listed on the Hong Kong and Shanghai exchanges, respectively. It has no foreign strategic investors. China Merchants Group is its largest shareholder, with a 30% stake. Retail banking, corporate banking and wholesale banking accounted for 57%, 41%, and 2% of total profit before tax, respectively, and 56%, 41%, and 3% of total revenue in 2023.
Sector
Financial Services
Industry
Banks - Regional
Stock Style Box
Large Value
Total Number of Employees
116,529

Competitors

Valuation

Metric
600036
601398
000001
Price/Earnings (Normalized)
6.046.164.77
Price/Book Value
0.890.620.48
Price/Sales
2.682.731.35
Price/Cash Flow
2.4010.62
Price/Earnings
600036
601398
000001

Financial Strength

Metric
600036
601398
000001
Quick Ratio
Current Ratio
Interest Coverage
Quick Ratio
No chart available

Profitability

Metric
600036
601398
000001
Return on Assets (Normalized)
1.33%1.10%0.84%
Return on Equity (Normalized)
16.13%14.64%11.84%
Return on Invested Capital (Normalized)
Return on Assets
600036
601398
000001
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