[ET Net News Agency, 14 October 2019] Nomura lowered its target price for China
Construction Bank (CCB)(00939) to HK$7.87 from HK$8.74 and maintained its "buy" rating.
The research house raised the valuation discount rate to 13.5% from 12.5% to factor in
rising macro uncertainties, while it largely maintained its FY2019-21 earnings forecasts.
Nomura said CCB trades at an attractive valuation of 0.6x FY2019 PB, with ROE at 12.5%
and dividend yield at 5.8%. Meanwhile, the H-share implied NPL ratio is 8.7%, versus
reported NPL at 1.4%.
Nomura expects CCB to deliver earnings growth of 4.3% for FY2019 (previously 4.2%),
driven by steady loan growth of 7.5%. At the same time, it thinks CCB's NIM will be under
pressure, given the weakening of loan demand, and the adoption of a new loan pricing
mechanism.
Nomura thinks the bank's asset quality will remain stable in 2H, as its NPL ratio
decreases by 3bps to 1.43% and NPL coverage increases by 10pps to 218%. In addition, its
exposure to high-risk sectors continues to decrease and the share of the retail business
continues to increase. (KL)