China Merchants Bank (600036) Investment Research Analysis and Trading Recommendations

1. Profitability and Fundamentals (2025 Earnings Preview)
Revenue of 337.532 billion yuan, up 0.01% year-over-year, ending the decline and stabilizing;
Net profit attributable to shareholders of 150.181 billion yuan, up 1.21% year-over-year, with Q4 single-quarter growth of about 3.4%, clear marginal improvement;
Asset quality: NPL ratio at 0.94% (industry excellent), loan loss reserve coverage ratio at 391.79%, solid risk buffers;
Core advantages: Stable retail and wealth management barriers, low-cost liabilities support net interest margin resilience, ROE significantly higher than industry average.
2. Key Highlights
Strong earnings resilience: Despite pressure on net interest margin, profits are maintained through cost control and reserve adjustments, non-interest income rebounded in the second half;
Excellent asset quality: NPL ratio below 1% long-term, ample reserves, outstanding cyclical resilience;
Valuation and dividends: PE approximately 6.55x, PB 0.89x, at historical lows; stable dividend payout ratio around 34%, dividend yield about 5.1%, offering high dividend investment value;
Institutional expectations: Net profit growth in 2026 is expected to rebound to 5%-8%, significantly outperforming large banks on average.
3. Risk Points
Net interest margin in the industry still faces downward pressure;
Volatility in wealth management and financial market businesses affecting non-interest income;
Macroeconomic recovery pace slower than expected.
4. Trading Recommendations
Investment style: Value-oriented, medium- to long-term allocation, suitable for conservative funds.
Operational strategies
Long-term: Currently undervalued with high dividend yield, primarily build positions gradually and hold, aiming for valuation recovery and stable dividends;
Swing trading: Add positions during recent lows, reduce during rebounds to resistance levels, control position size to 50-70%;
Stop-loss: Effectively exit if falling below recent oscillation lower boundary, prioritize risk control.
Target: Short-term valuation recovery to PB 1.0-1.1x; long-term gains from profit rebound and ROE improvement for double returns.