China Life (2628 HK) Summary
Core Content Overview
This document provides an equity research update on China Life (2628 HK), focusing on its performance in the first quarter of 2022 (1Q22), financial outlook, and market position. It includes key financial metrics, solvency ratios, and analyst recommendations, emphasizing the company's resilience and potential for recovery in the new business segment.
Key Financial Performance (1Q22)
- Net Profit: Declined by 46.9% YoY to RMB15.2bn, representing 29% of the FY22 forecast.
- VNB (New Business Value): Recorded a 14.3% YoY decline, outperforming major peers based on estimates.
- Total FYP (First Year Premium): Declined by 1.5% YoY, but the contribution of 10-year+ regular pay products remained stable at 19%.
- Agent Productivity and Income: Both improved YoY, indicating a positive trend in the distribution channel.
- Agent Headcount: Decreased to 0.78mn at the end of 1Q22, a 5% QoQ decline, with a narrowing decline compared to previous quarters.
Valuation Metrics
- P/BV (Price to Book Value) FY22E: 0.5x
- P/EV (Price to Enterprise Value) FY22E: 0.2x
- Yield (%): Increased to 7.1% in FY22, with an expected rise to 9.6% in FY24.
- RoEV (Return on Equity Value): Declined from 16.8% in FY20A to 10.6% in FY22E, but is expected to stabilize at 11.0% in FY24E.
- ROE (Return on Equity): Dropped from 11.8% in FY20A to 10.6% in FY22E, but is projected to rise to 12.9% in FY24E.
Market Position and Outlook
- New Business Momentum: Despite a YoY decline, China Life outperformed major peers in 1Q22, and management is confident in delivering better-than-peers growth for FY22.
- Agent Headcount Stabilization: The agent headcount is expected to stabilize around mid-2022, which could support a turnaround in new business growth.
- Solvency Position: Under C-ROSS 2.0, the company's core solvency ratio was 176% and comprehensive solvency margin was 248%, both well above regulatory requirements (50% and 100%, respectively).
- Future Outlook: The report anticipates sequential improvements in new business momentum starting from mid-2022, leading to a rebound in earnings.
Analyst Recommendation
- Rating: BUY (Maintain)
- Target Price: HK$18.18
- Upside Potential: +63.2% from current price (HK$11.14)
Financial Summary (FY20A–FY24E)
| Metric |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| GWP (RMB mn) |
612,265 |
618,327 |
621,357 |
633,597 |
650,163 |
| GWP Growth (%) |
8.0% |
1.0% |
0.5% |
2.0% |
2.6% |
| Net Profit (RMB mn) |
50,257 |
50,921 |
51,697 |
59,737 |
69,690 |
| Net Profit Growth (%) |
(13.8%) |
1.3% |
1.5% |
15.6% |
16.7% |
| RoEV (%) |
16.8% |
13.9% |
10.6% |
10.9% |
11.0% |
| Core Solvency Ratio (%) |
260% |
263% |
257% |
253% |
249% |
| Comprehensive Solvency Ratio (%) |
269% |
271% |
265% |
260% |
255% |
Balance Sheet Highlights
- Investment Assets: Increased from RMB4.095tn in FY20A to RMB5.838tn in FY24E.
- Total Assets: Rose from RMB4.252tn in FY20A to RMB6.338tn in FY24E.
- Shareholders' Equity: Grew from RMB450.056bn in FY20A to RMB556.306bn in FY24E.
- Total Equity: Increased from RMB456.937bn in FY20A to RMB564.902bn in FY24E.
Stock Data
| Metric |
Value |
| Market Cap (HK$ mn) |
698,496 |
| Average 3 mths Turnover (HK$ mn) |
456.97 |
| 52w High/Low (HK$) |
16.64 / 10.86 |
| Total Issued Shares (mn) |
7,441 (H) / 20,824 (A) |
Share Performance
| Period |
Absolute (%) |
Relative (%) |
| 1-mth |
-7.2% |
-0.3% |
| 3-mth |
-19.7% |
-2.1% |
| 6-mth |
-21.4% |
+2.7% |
Key Ratios and Metrics
| Metric |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Net Investment Yield (%) |
4.3% |
4.4% |
3.5% |
4.1% |
4.1% |
| Total Investment Yield (%) |
5.3% |
5.0% |
4.1% |
4.7% |
4.7% |
| Investment Assets Growth (%) |
14.6% |
15.2% |
5.5% |
6.9% |
9.7% |
| RoEV (%) |
16.8% |
13.9% |
10.6% |
10.9% |
11.0% |
| ROE (%) |
11.8% |
11.0% |
10.6% |
11.7% |
12.9% |
| EVPS (Enterprise Value per Share, RMB) |
37.9 |
42.6 |
46.4 |
50.8 |
55.6 |
| BVPS (Book Value per Share, RMB) |
15.9 |
16.9 |
17.6 |
18.5 |
19.7 |
Conclusion
China Life has experienced a moderate decline in new business and net profit in 1Q22, but the decline in VNB is better than its peers, and agent productivity and income improved. The company's solvency position remains strong, and the agent headcount is stabilizing, which may support future growth. Despite a current low valuation, the analyst recommends maintaining a Buy rating, with an upside of 63.2% based on the target price. The long-term outlook is cautiously optimistic, with expectations of sequential improvements in new business momentum and recovery in earnings.
