BofA lifts CMSC target to HKD17.5 on tech IPO gains

BofA raised CMSC's price target to HKD17.5 from HKD16.6, keeping a Buy rating on strong tech IPO gains.

BofA Securities said CMSC's investment gains from tech IPOs served as the main growth driver during the period, with the group's PE and investment subsidiaries contributing RMB5.9 billion in 1H26 earnings, about 56 percent of total profit.

CMSC's net profit for 2Q grew 155 percent YoY and 125 percent QoQ to RMB7.4 billion, in line with its earlier profit forecast. Revenue for 1H26 rose 108 percent YoY to RMB22 billion, while brokerage, underwriting, net interest income and trading gains all recorded strong growth. Net profit for 1H26 surged 105 percent YoY to RMB10.6 billion, already reaching 86 percent of full-year 2025 earnings. The company declared an interim dividend of RMB1.67 per 10 shares.

The group holds about a 0.7 percent stake in CXMT (688825.SH) after its listing. Based on CXMT's latest market capitalization of about RMB3.8 trillion, potential investment gains exceed RMB10 billion. Even after considering liquidity discounts, BofA expects CMSC to record considerable trading gains and net profit growth in 2H26. The CXMT position represents one of the largest single-stock holdings in CMSC's investment portfolio and shows the firm's ability to capture value from China's semiconductor sector.

In response to higher forecasts for average daily turnover in the A-share market and increased expectations for tech IPO investment gains, BofA raised its EPS forecasts for CMSC for 2026 to 2028 by 10 percent to 33 percent. The revised estimates reflect both the stronger-than-expected trading environment and the potential for additional gains from CMSC's investment portfolio as more Chinese tech companies pursue public listings.

CMSC shares rose 6.585 percent on the day, with short selling at $16.82 million, a 4.575 percent ratio. The stock's advance came as investors digested the earnings beat and the upward revision from BofA, which now sees the company's investment arm as a sustained earnings engine rather than a one-off beneficiary of the current tech rally.

The rating action reflects BofA's conviction that CMSC's investment portfolio, anchored by its CXMT stake, will continue to generate outsized returns as China's tech IPO pipeline remains active. The CXMT position alone, valued at more than RMB10 billion in potential gains, provides a substantial cushion for the stock even if trading volumes in the A-share market moderate. Investors will watch CMSC's 2H26 earnings for further trading gains and any additional IPO exits from its portfolio.

This article is for informational purposes only and does not constitute investment advice.