China Merchants Securities A/H: Time to reassess the CXMT upside; 3Q earnings the key catalyst

We see a compelling opportunity for investors to revisit CMS ahead of the 3Q26 earnings season. CMS is one of the few China brokers with a visible company-specific earnings catalyst in 3Q26, while much of the sector remains exposed to softer trading activity and margin financing trends. CMS has the highest exposure to CXMT among China brokers, implying ~Rmb27bn of unrealized gains, yet our analysis suggests only a portion of this value is reflected in the share price. As brokers begin to recognize CXMT-related gains following its July listing, we believe CMS could deliver ~190% y/y earnings growth in 3Q26 and meaningfully outperform its peers. Following the recent pullback in technology sentiment, CMS's outperformance vs. peers has retraced from its July peak, and we see an attractive opportunity to accumulate ahead of the 3Q26 earnings catalyst. Our new Jun-27 PTs are Rmb23.50 and HK$21.00 for CMS-A and -H, indicating 33% and 43% potential upside, respectively.