CICC(SH:601995)2025-03-13 15:48Investment Rating - The report rates the investment in CICC as favorable due to its current undervaluation and potential for growth in the upcoming IPO market and M&A activities [3][4]. Core Insights - CICC's H-shares have risen approximately 25% since the beginning of the year, yet the price-to-book ratio (PB) remains at 0.76, indicating a discount to net assets [3]. - The brokerage industry has a lower leverage ratio (4-5 times) compared to banks (over 10 times), suggesting lower operational risks and a more transparent balance sheet [3][4]. - The Hong Kong market is experiencing increased investment activity, with a projected 80% year-on-year increase in IPOs in 2025, which will positively impact CICC's performance [4][5]. - Anticipated supply-side reforms and M&A activities are expected to enhance operational efficiency among leading brokerages, including CICC [4][6]. - The domestic IPO market is expected to recover in 2025, with an estimated 150 IPOs and a total scale of around 1 trillion yuan, leading to a 23% increase in underwriting fees and a 3.2% revenue increase for CICC [5][6]. - New regulations will stabilize underwriting fees, supporting the recovery of investment banking revenues for CICC [5]. - The H-share market is expected to expand, with a projected 89% increase in IPOs in 2024, benefiting CICC, which has ranked first in H-share trading for five consecutive years [6]. - CICC's M&A business, which accounts for 33.4% of its revenue, is anticipated to grow further due to favorable regulatory changes [6][7]. Summary by Sections Investment Outlook - CICC is positioned as a left-side investment opportunity due to its low valuation and performance elasticity, benefiting from industry reforms [4]. IPO Market - The expected recovery in the domestic IPO market will enhance CICC's revenue and profit margins, with a projected 5% profit growth [5]. H-share Market and M&A - CICC is set to benefit significantly from the H-share market expansion and the growth of its M&A business, supported by new regulatory frameworks [6][7]. Fee Structure - The report notes that the fee structure for investment banking services is not standardized, with significant variations based on company qualifications, but new regulations are expected to provide a more stable income environment [9].