20230317-招银国际-中国平安-02318.HK-Expect_VNB_turnaround_in_1Q23_and_FY23_7页_985kb

Ping An (2318 HK) Summary

Core Content

Ping An Group (2318 HK) has shown signs of recovery in its business performance, particularly in the life insurance segment, driven by ongoing channel reforms and synergies within the group. The company is expected to maintain a BUY rating with a target price of HK$80.30.

Main Points

Life Insurance Segment

• VNB Turnaround: The life insurance business saw a turnaround in VNB momentum in 4Q22, with a $11.7%$ YoY growth. This is attributed to improved productivity across various channels, including community grid and private wealth advisers.
• Agent Productivity: High-potential agents experienced $25%$ and $32%$ YoY growth in productivity and income, respectively, reversing a downward trend from 2021. Agents' average monthly income reached RMB 8k-9k.
• Cross-selling Synergies: The VNB from customers entitled to health management or eldercare services increased to $55%$ in FY22 from $31%$ in FY21, indicating strong cross-selling performance.
• VNB Growth Expectations: Management guided for positive VNB growth in 1Q23 and FY23, with a focus on sustaining this momentum.
• Valuation: A and H shares are trading at 0.5x P/EV and 0.9x P/BV for FY23E, with an operating ROE of $15.2%$. The company is expected to drive long-term profitability and a solid dividend payout.

Property and Casualty (P&C) Insurance

• Underwriting Margin: The overall underwriting margin was dragged to $-0.3%$ in FY22 due to a 40pts increase in the guarantee insurance combined ratio.
• Combined Ratio: Excluding guarantee insurance, the P&C combined ratio was $97.2%$ in FY22. The overall combined ratio was $100.3%$, with a slight increase in loss ratio and expense ratio.
• Premium Income: Premiums earned in FY22 increased by $10%$ YoY, with non-auto insurance showing a $19%$ growth.

Financial Performance

• Net Profit: Net profit declined from FY20A to FY21A ($-28.7%$ YoY), but increased in FY22 ($-16.8%$ YoY) and is expected to grow significantly in FY23 ($+56.0%$ YoY) and FY24 ($+34.3%$ YoY).
• EPS: EPS (Reported) was RMB 8.10 in FY20A, RMB 5.77 in FY21A, RMB 4.80 in FY22A, and expected to reach RMB 7.49 in FY23E and RMB 10.06 in FY24E.
• Group Embedded Value: The group embedded value per share was RMB 72.65 in FY21A, RMB 77.89 in FY22A, and expected to reach RMB 81.58 in FY23E and RMB 89.68 in FY24E.
• Dividend Yield: The dividend yield is expected to rise from $5.7%$ in FY22A to $6.8%$ in FY23E and $9.1%$ in FY24E.

Investment and Capital

• Investment Income: Investment income decreased in FY22 but is expected to increase in FY23 and FY24.
• Total Investment Assets: These increased by $11.5%$ from FY21 to FY22.
• Capital Adequacy Ratio: The ratio decreased slightly from $13.34%$ in 2021 to $13.01%$ in 2022, but is expected to remain stable.

Market Data

• Market Cap: HK$376,124.0 million.
• Shareholding Structure: Charoen Pokphand Group holds 6.5%, Shenzhen Investment Holdings holds 5.3%.
• Share Performance: 1-month return was -12.1%, 3-month return was -1.0%, 6-month return was +10.4%.
• 12-Month Price Performance: Image available, indicating past performance trends.

Key Information

• IFRS 17 Impact: The adoption of IFRS 17 is expected to have a minimal impact on book value and OPAT, with net profit appearing smoother due to the treatment of reserve charges and variance.
• Valuation Metrics:
  • P/EV: 0.5x for FY23E.
  • P/BV: 0.9x for FY23E.
  • Dividend Yield: Expected to rise to $9.1%$ in FY24E.
• ROE: Expected to increase to $15.2%$ in FY23E and $18.5%$ in FY24E.

Analyst Ratings

• CMBIGM Rating: BUY, with a target price of HK$80.30.
• Potential Return: Over $15%$ over the next 12 months.

Disclaimer

This report is for informational purposes only and does not constitute investment advice. Investors are encouraged to consult with a professional financial advisor. The information is subject to change and should not be relied upon as a guarantee of future performance.