20180823-招商证券_香港_-中国人寿-02628.HK-Poor_1H18_NBV__Undervalued_in_long-term_view_5页_581kb

报告摘要

China Life (2628 HK) Summary

Core Content

China Life (2628 HK) is a major player in the insurance sector, and its first-half of 2018 (1H18) performance and valuation are analyzed in this report.

Key Financial Performance

1H18 Highlights

Shareholders' Net Profit: RMB16.4bn, up 34.2% YoY. The increase was partly driven by changes in reserve assumptions.
Total Comprehensive Income: RMB14.172bn, up 19.4% YoY.
ROE (not annualized): 5.1%.
Net Investment Yield: 4.64%.
Total Investment Yield: 3.70%.
Life and Health NBV: RMB28.2bn, down 23.7% YoY.
Aggregate NBM: Maintained at 22.5% in 1H18, due to significantly reduced single premiums.
Regular FYP with 10Y or longer payment duration: Dropped 38.8% YoY.
Total Number of Exclusive Sales: Dropped 9% HoH.
Impact of Reserve Assumption Changes: Positively impacted 1H18 pre-tax profit by 14%.

Management Guidance

The company dismissed agents with unsatisfactory performance in 1H18.
Management reiterated the key strategy to strengthen the sales of protection products.

Valuation and Risk

Current Valuation

The stock is trading at ~0.5x 18E P/EV or ~1.2x 18E P/B, indicating it is undervalued in the long-term view.
It is at the low end of its historical P/EV and P/B ranges.

Investment Outlook

Rating: BUY.
Target Price (TP): HK$32.90, representing a +75% upside from the current price of HK$18.82.
Key Catalyst: Improved NBV growth in the second half of 2018.
Key Downside Risks: Adverse capital market conditions and lower-than-expected NBV growth.

Financial Forecasts (RMBmn)

Year ended 31 Dec	2016	2017	2018E	2019E	2020E
Total Revenues	540,781	643,355	671,126	770,566	879,539
Shareholders' Net Profit	19,127	32,253	42,729	51,587	58,580
EPS (Rmb)	0.66	1.13	1.51	1.83	2.07
BVPS (Rmb)	10.74	11.35	12.87	14.69	16.76
P/E (x)	23.2	13.6	10.1	8.4	7.4
P/B (x)	1.4	1.4	1.2	1.0	0.9
P/EV (x)	0.7	0.6	0.5	0.4	0.4
ROE (%)	6.2	10.3	12.5	13.2	13.2

Peer Comparison

Company	Ticker	Rating	Price (HK$)	TP (HK$)	Mkt Cap (USD m)	P/EV (2018E)	P/E (2018E)	P/B (2018E)	ROE (2018E)
China Life	2628 HK	Buy	18.70	32.9	85,702	0.5	10.1	1.2	12.5%
Ping An	2318 HK	Buy	74.10	109.0	168,166	1.2	11.5	2.1	19.4%
China Pacific	2601 HK	Buy	30.45	54.6	41,581	0.7	11.5	1.4	13.4%
New China Life	1336 HK	Buy	34.70	51.2	18,538	0.5	11.7	1.2	11.3%

Key Data

Metric	Value (HK$)
52-week range	18.08–28.2
Market Cap	140,043
Avg. Daily Volume (mn)	49.42
Shareholding Structure
- China Life Insurance (Group) Co.	68.37%
- BlackRock, Inc.	7.84%
- JPMorgan Chase & Co.	5.67%
No. of Shares Outstanding (mn)	7,441
Free Float	69.0%

Investment Ratings

Rating	Definition
BUY	Expect stock to generate 10%+ return over the next 12 months.
NEUTRAL	Expect stock to generate +10% to -10% over the next 12 months.
SELL	Expect stock to generate loss of 10%+ over the next 12 months.

Main Points

Disappointing NBV Performance: The NBV in 1H18 dropped 23.7% YoY, which was below expectations. This was attributed to a decline in regular FYP with long payment durations, reduced exclusive sales, and possibly incorrect product strategies.
Positive Net Profit: Despite the NBV decline, net profit increased 34.2% YoY, largely due to reserve assumption changes.
Undervaluation: The stock is considered undervalued based on its current P/EV and P/B ratios, suggesting a BUY rating in the long-term view.
Strategic Shift: The company is focusing on protection products and improving its agent performance, which could drive future growth.
Key Risks: Adverse capital market conditions and lower-than-expected NBV growth could negatively impact performance.

Conclusion

China Life's 1H18 performance was below expectations, primarily due to a sharp drop in NBV and reduced sales. However, the company's low valuation and strategic focus on protection products suggest a BUY rating for the long-term. The main catalyst for improvement is expected to be better NBV growth in the second half of 2018, while the key risks include adverse capital market conditions and lower-than-expected new business growth.

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