20180826-招商证券_香港_-中国太保-02601.HK-2Q18_NBV_up_35.2__YoY__Maintain_BUY_6页_933kb

CPIC (2601 HK) Summary

Core Content

China Merchants Securities (HK) Co., Ltd. has issued a report on CPIC (2601 HK), highlighting its financial performance and investment outlook.

Financial Performance

• 1H18 Net Profit: RMB8.3bn, up 26.8% YoY.
• 1H18 Comprehensive Income: RMB8.6bn, up 41.5% YoY.
• ROE (not annualized): 6.0%.
• 1H18 Net Investment Yield: 4.5%.
• 1H18 Total Investment Yield: 4.5%.
• Life NBV Performance:
  • 1Q18: Down 32.5% YoY.
  • 2Q18: Up 35.2% YoY, showing a rebound.
• Agency Channel Performance:
  • 1H18: Regular FYP growth of -22.8% YoY.
  • 2Q18: Regular FYP growth of 8.0% YoY.
• GWP Growth: Total life GWP up 18.5% YoY due to agency-channel renewal premiums.

Business Structure and Sales Force

• The company has seen an increase in the monthly average number of active agents by 4.9% YoY in 1H18, indicating a stable and growing sales force.
• The agency-channel regular FYP rose in 2Q18, suggesting enhanced productivity and a rebound in new business value (NBV) growth.

Management Guidance

• Management plans to accelerate transformation, shifting the growth model for individual business from agent headcount growth to productivity improvement.
• Focus will be on urban area business penetration and technology capabilities to improve new customer acquisition.
• The company will focus on both risk protection and long-term savings products.

Valuation and Risk

• Current Valuation:
  • P/EV: ~0.7x 2018E.
  • P/B: ~1.4x 2018E.
• Target Price: HK$54.60, representing an 81% increase from the previous price of HK$30.15.
• Key Catalyst: Better-than-expected NBV growth in 2H18.
• Key Downside Risks: Adverse capital market conditions and lower-than-expected NBV growth.

Peer Comparison (Valuation)

Financial Highlights

• Total Revenues are projected to increase from RMB266,081mn in 2016 to RMB493,670mn in 2020E.
• Shareholders' Net Profit is expected to grow from RMB12,057mn in 2016 to RMB27,378mn in 2020E.
• EPS is projected to rise from RMB1.33 in 2016 to RMB3.02 in 2020E.
• BVPS is expected to increase from RMB14.54 in 2016 to RMB22.94 in 2020E.
• ROE is projected to rise from 9.1% in 2016 to 14.1% in 2020E.

Investment Outlook

• The report maintains a BUY rating for CPIC.
• The rationale includes:
  • The rebound in 2Q18 NBV as expected.
  • Stable sales force with an increase in active agents.
  • The stock is undervalued based on historical P/EV and P/B ratios.
• The key catalyst for the stock is better-than-expected NBV growth in the second half of 2018.
• The key downside risks include adverse capital market conditions and lower-than-expected NBV growth.

Key Data

• 52-week range (HK$): 28.05 - 42.4.
• Market Cap (HK$ mn): 83,675.
• Avg. Daily Volume (mn): 18.48.

Shareholding Structure

• Fortune Investment Co.: 14.17%.
• Shenergy Group: 13.52%.
• No. of Shares Outstanding (mn): 9,062.
• Free Float (mn): 2,775.

Investment Ratings

• Industry Rating: OVERWEIGHT (expect sector to outperform the market over the next 12 months).
• Company Rating: BUY (expect stock to generate 10%+ return over the next 12 months).

Analyst and Regulatory Disclosures

• The analysts responsible for the report certify that the views expressed reflect their personal views.
• The report is for information purposes only and should not be construed as investment advice.
• Regulatory Disclosures indicate that the report is subject to specific legal restrictions and is only for relevant persons as defined under UK financial regulations.

Conclusion

CPIC's financial performance in 1H18 was positive, with increased net profit and comprehensive income. The rebound in 2Q18 NBV and stable sales force indicate improving performance. The company is undervalued and maintains a BUY rating due to improved life insurance performance and good investment yield. The key catalyst is better-than-expected NBV growth, while the key risks are adverse capital markets and lower-than-expected NBV growth.