Guotai Junan Securities: Initiates CITIC Financial Asset with a "Neutral" rating, reasonable stock price HKD 1.16-1.28

According to the Zhitong Finance APP, Guosen Securities has released a research report stating that it has initiated coverage on CITIC FAMC (02799) with a "Neutral" rating. The company is expected to achieve net profit attributable to ordinary shareholders of RMB 10.4 billion / 10.9 billion / 11 billion from 2025 to 2027, representing a year-on-year growth of 8.5% / 4.1% / 1.1%. The EPS is projected to be RMB 0.13 / 0.14 / 0.14, corresponding to a PE ratio of 7.6 / 7.3 / 7.3 times and a PB ratio of 1.70 / 1.38 / 1.16 times. Considering both absolute and relative valuations, the reasonable stock price for the company is estimated to be between HKD 1.16 and 1.28.

The main points from Guosen Securities are as follows:

Revenue and net profit both increased in the first half of the year

In the first half of 2025, CITIC FAMC achieved operating revenue (including performance from joint ventures and associates) of RMB 40.2 billion, a year-on-year increase of 19.9%; net profit from continuing operations was RMB 5.5 billion, a year-on-year increase of 19.7%; net profit attributable to ordinary shareholders of the parent company was RMB 6.2 billion, a year-on-year increase of 15.7%. The annualized ROE for the first half of the year was 21.1%, and ROA was 1.1%.

Slight growth in asset scale compared to the beginning of the year

As of the end of the second quarter of 2025, the total assets of the company were RMB 1.01 trillion, an increase of 2.7% compared to the beginning of the year, but a year-on-year decrease of 4.2%. From the perspective of segment operating performance, the total assets of the non-performing asset management segment increased by 2.7% compared to the beginning of the year, while the total assets of the asset management and investment segment increased by 1.6% compared to the beginning of the year. Among them, the assets from acquisition and disposal business, distressed asset revitalization business, and equity business increased compared to the beginning of the year, while the assets from acquisition and restructuring business contracted, mainly due to the company's proactive adjustment of its asset structure and continuous reduction of the scale of acquisition and restructuring business assets.

Revenue growth in non-performing asset management segment, decline in asset management and investment segment revenue

From the segment operating performance, the revenue of the non-performing asset management segment increased by 58.3% year-on-year, mainly due to approximately RMB 21.3 billion in revenue confirmed from investments in Bank of China and China Everbright Bank; revenue from the asset management and investment segment decreased by 85.1%, with its proportion in the revenue before group offsetting dropping to 5.6%. In the non-performing asset segment, revenue from acquisition and disposal business and acquisition and restructuring business decreased year-on-year, while revenue from distressed asset revitalization business and equity business increased year-on-year.

Credit costs increased year-on-year, enhancing risk resistance capability

The credit cost rate for the first half of the year, calculated using "asset impairment losses / initial balance of debt instruments measured at amortized cost," was 15.3%, a significant year-on-year increase. From the details of asset impairment losses, the increase in credit costs was mainly due to the increase in credit impairment of debt instruments measured at amortized cost. A large amount of impairment provision has enhanced the company's risk resistance capability. As of the end of June 2025, the overall provision coverage ratio for debt instruments measured at amortized cost and those measured at fair value with changes recognized in other comprehensive income was 270%, an increase of 44 percentage points compared to the beginning of the year.

Risk Warning: Risks related to valuation, profit forecasts, financial risks, market risks, etc