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<Research Report>BofAS: CN Main Board IPO Reform Positive for CICC, which Is Rated Buy with TP $20.3
2023/02/03 14:23
The China Securities Regulatory Commission (CSRC) released the draft of IPO registration system reform. It is expected that the official launch of Main Board registration IPO reform will take place in 1H23 and the first batch of registration IPOs to be listed in 3Q23 on the Main Board at the earliest, BofA Securities said in a research report. The broker estimated the reform will increase China's annual IPO size by RMB120 billion in FY23E, or a YoY increase of 21%, and the profit contribution is expected to range between 5-10%.

The broker expected mainland securities firms with relatively high market share in investment banking business, including CICC (03908.HK) and CITIC SEC (06030.HK) could be key beneficiaries of the reform.

Considering its leading market position, BofA Securities said CICC would be benefiting most from the full implementation of the registration system on the mainland’s main board. It expected an increase of CICC’s market share, and greater revenue and earnings exposures to underwriting business. The broker set its TP at $20.3.

CITIC SEC, as China's largest brokerage, may also benefit. But due to its balanced revenue structure, investment banking revenue will be less affected than that of CICC. The broker sets its TP at $22.3. CICC and and CITIC SEC were both rated Buy.
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