建设银行（00939.HK）- 盈利能力出众的大行正被低估

建行是流动性最优秀的大行之一，贷存比低且资金成本低于同业，在国内的一万三千余家分支机构保证了较高的吸存实力，领先同业的ROA和ROE亦表明盈利能力出众。近期发债再融资皆因资本要求从严，而美银减持的传闻也并不影响基本面。一季末地方政府融资平台贷款仅占总贷款的5%，资产质量大幅恶化可能性不大。我们认为建行优秀的流动行和盈利能力将在信贷偏紧的大环境下带动良好的中报业绩。我们将12个月目标价设在8.4港币，相当于10.7倍的2011E P/E和2.2倍的2011E P/B，目前估值优势明显，投资者可适当关注逢低吸纳的机会。

The 12 RRR hikes since the beginning of 2010, along with proposed dynamic differentiated RRR guidance and daily LDR monitoring have placed heightened liquidity pressure on Chinese banks. CCB is one of the most liquid Chinese banks with low LDR and lower funding cost compared to peers. With 13,415 domestic branches by the end of 2010, CCB is also among the banks with the best deposit-taking capacity.

Capital raising result of regulatory change The bank's board of directors recently approved plans to issue no more than Rmb80 billion subordinated bonds, a result of CBRC's proposed regulatory changes in CAR requirements, including risk-weighting changes for interbank assets, and the proposal that only provision above 2.5% of loan portfolio can be included in subsidiary capital.

Potential sell in stake by BoA no impact on fundamentals Recent share price was lackluster partly due to rumors that BoA may sell half of its 11% stake. The potential sale is BoA's own effort to increase CAR and won't affect CCB's fundamentals. Temporary shock on stock price should be absorbed in time.

Asset quality to remain benign NPL balance and NPL ratio continued to double-decline in 1Q11, with provision-to-loan ratio at 250%. LGFV loan balance declined almost half to Rmb280 billion yuan in 1Q11, accounted for 5% of total loans, thanks to reclassification of fully cash-covered LGFV loans into regular corporate loans.

Top earning capacity among H share banks ROA and ROE at 1Q11 came at 1.74% and 26.2%, both the highest among peers, thanks to high operating income/total assets and net profit/operating income ratios.

Valuation and Recommendation We believe CCB's high liquidity, strong deposit-taking capability will be beneficial in a tightened credit market. Revise 12-month target price to HK$8.4, based on 10.7x2011E P/E and 2.2x2011E P/B. Maintain buy on attractive valuation.