Key Takeaways:
Citigroup Inc. projects an average 35 percent upside for Chinese brokerage H-shares, driven by strong first-quarter growth and a forecast 10 percent return on equity for 2026.
"Robust average daily turnover in A-shares, solid underwriting activity, and strong sales momentum of domestic mutual funds" support the bullish outlook, a Citigroup research report published Tuesday said.
Chinese brokers tracked by the bank reported a 40 percent year-over-year increase in revenue and a 44 percent rise in net profit during the first quarter of 2026. The report highlighted China International Capital Corp. (CICC) as having the most significant profit growth, while China Galaxy Securities (CGS) saw the slowest increase. Citi revised its target prices for multiple brokers, naming CICC its top pick.
The forecast implies brokers will trade at a 2026 price-to-book ratio of approximately 1x, a valuation supported by the expected 10% ROE. CICC's designation as the top pick could attract investor focus, especially after its profits significantly outpaced peers in the first quarter.
Following the sector review, Citi updated its investment ratings and price targets for several Hong Kong-listed Chinese brokers.
The positive revision for CICC comes after the broker's net profit jumped 75.2% year-over-year in the first quarter, as reported separately.
The updated targets suggest Citi sees continued strength in China's capital markets activity translating into strong profitability for the brokerage sector. Investors will be watching second-quarter results to see if the earnings momentum can be sustained.
This article is for informational purposes only and does not constitute investment advice.
