In 2025, the company achieved steady double-digit growth in performance, with ROE increasing year-on-year to 9.94%, and profit quality continued to improve. The effectiveness of wealth management transformation is evident, with client custody assets exceeding RMB 5.29 trillion, stock and fund trading volume increasing by nearly 70% year-on-year. AI empowerment and the development of a buyer's advisory system have strengthened long-term client acquisition capabilities. The competitiveness of investment banking business steadily improved, with the number of IPO underwriting rankings rising to 4th in the industry, bond underwriting scale exceeding RMB 510 billion, and asset securitization business maintaining a leading edge. The asset management business benefited from the deepening presence in mutual funds, with management scale steadily expanding. Revenue for 2026-2028E is projected to be RMB 27.620/30.265/32.827 billion, representing year-on-year growth of +10.6%/+9.6%/+8.5% respectively. The closing price on April 2 corresponds to dynamic P/B ratios of 0.96/0.90/0.83 times for 2026-2028E. We maintain "Buy" rating on the company.

Event

China Merchants Securities released its 2025 annual report on March 28. The company achieved revenue of RMB 24.97 billion in 2025, a year-on-year increase of +20%, maintaining growth for three consecutive years. Net profit attributable to parent company shareholders was RMB 12.35 billion, a year-on-year increase of +18.91%.

Risks:

Uncertainty in market price fluctuations: Capital market prices are influenced by various factors, including macroeconomic fluctuations, changes in the global economic landscape, and shifts in investor sentiment, all of which may lead to stock price movements and impact the valuations of brokers, insurers, and other financial institutions. The performance of the non-banking financial sector is significantly affected by market prices and trading volumes.

Uncertainty in earnings forecasts: Securities firms and insurers' profitability is influenced by various factors, and forecasts related to industry valuation and performance carry inherent uncertainties. Additionally, intensifying competition within the sector may lead to deviations in earnings projections.

Technological updates and iterations: The rapid development of emerging technologies requires financial institutions to continuously adapt to technological changes. However, faster pace of technological updates also brings high R&D and talent training costs, potentially increasing operational costs in brokers and insurers. Additionally, technological innovation may further increase the uncertainties.