2024-10-14 14:30Investment Rating - The investment rating for China Construction Bank Corp. is Overweight [1][22]. Core Views - The report indicates a price target of HK$7.10, with a current share price of HK$5.73, suggesting an attractive investment opportunity [1][3]. - The earnings forecasts for China Construction Bank have been revised down due to expected NIM contraction and weaker fee income growth, with net profit growth projected at 0.9%/0.3%/1.4% for 2024/25/26 [1][5]. - The bank's long-term stability is supported by a strong track record in bond trading and well-managed asset quality [5][6]. Summary by Sections Earnings Drivers - Net interest margin (NIM) is forecasted to decline to 1.52% in 2024 and 1.46% in 2025, influenced by mortgage rate cuts and LPR adjustments [1][9]. - Total asset growth is expected to moderate to 8.4% in 2024 and 7.0% in 2025 [9]. - Credit costs are projected to decrease to 0.51% in 2024 [9]. Revenue and Profitability - Revenue growth estimates have been revised down to -0.8% in 2024, 2.1% in 2025, and 8.1% in 2026 [1][5]. - Fee income growth is expected to decline by -7.2% in 2024, followed by modest growth in subsequent years [1][5]. Valuation and Price Target - The price target is derived from a dividend discount model, with a long-term dividend payout ratio of 32% and a discount rate of 10.5% in the base case [6][5]. - The report highlights an attractive valuation with a 7.7% dividend yield for CCB-H compared to approximately 5.6% for CCB-A [5][6]. Risk Reward Themes - The report indicates positive pricing power for the bank, with a 100% Overweight rating distribution [6][9]. - The bull case scenario assumes a quick recovery in the property market and strong global demand, leading to resilient ROE [6][7]. - The base case reflects moderating credit growth and higher NPL formation, while the bear case anticipates prolonged NIM pressure and asset quality deterioration [7][6].