Lyon: China Merchants Bank (03968) maintains a "outperform" rating with a target price of HKD 43.8.

Lyon released a research report maintaining an "outperform" rating for China Merchants Bank (03968) with a target price of HK$43.8. The company is the first Chinese bank to announce its preliminary performance last year, which was stable. The market may react positively to this. The report states that the net profit increased by 1.2% year-on-year, which is higher than the bank's expectations. Income and profit accelerated in the fourth quarter, and loan underwriting also accelerated. The non-performing loan ratio was 0.95%, which is 1 percentage point higher than the bank's forecast for the quarter, but remained stable year-on-year. The provision coverage ratio was 10 percentage points lower than expected by the bank, but it is still considered to be at a relatively high level. Lyon believes that investors like China Merchants Bank for its stable and reliable track record, and appreciate its efforts to achieve profit growth. Based on an earnings per share of RMB 5.66 and a 35% payout ratio, the dividend yield for the A-shares of China Merchants Bank is 5%, while the H-shares yield is approximately 5.4%. The bank believes that the A-shares of China Merchants Bank are more attractive. Despite uncertainties in 2025, the bank predicts a profit growth of 3.5%.