20210205-招银国际-中国平安-02318.HK-Expect_rebound_in_2021_5页_953kb

CMB International Securities | Equity Research | Company Update Summary

Core Content Overview

This report provides an analysis of Ping An (2318 HK) for the year ending December 31, 2020, and forecasts for 2021 and 2022. The key focus is on the company's financial performance, business recovery prospects, and valuation metrics. The report concludes with a BUY recommendation, maintaining the target price of HK$102.28.

Main Points

2020 Financial Performance

• Operating Profit: Increased by 4.9% YoY to RMB 143.1bn, despite a 4.2% decline in net profit.
• Life & Health (L&H) NBV: Declined by 34.7% YoY due to the impact of COVID-19 and ongoing reforms.
• P&C Underwriting Margin: Shrank due to worsening loss ratios in guarantee insurance and increased competition in auto insurance.
• Technology Business: Operating profit increased.
• Net Investment Yield: Dropped slightly to 5.1%.
• Customer Growth: Retail customer count rose to 218 million at year-end 2020, up 9% YoY.
• Solvency Ratios:
  • PA Life: 241.8% (up 10.2ppt YoY)
  • PA P&C: 241.4% (down 17.8ppt YoY)

2021 Outlook

• L&H NBV Recovery: Expected to resume positive growth as pandemic impact eases and demand for long-term protection products recovers.
• P&C Growth: Anticipated to continue with combined ratio expected to improve.
• NBV Margin: Expected to stabilize, driven by higher margin products, though product integration may temporarily impact margins.
• Valuation Adjustments: Metrics updated to reflect YE21 figures, subsidiary market values, and exchange rate assumptions.

Key Risks

1. Investment Assets: Exposed to further downside risks.
2. Life Business Rebound: Could miss expectations.
3. P&C Growth and Margins: Under pressure from competition and loss ratios.

Valuation and Target Price

• Target Price (HKD): HK$102.28 (up from HK$92.97).
• Valuation Metrics:
  • P/E: 8.8x (FY21E), 8.0x (FY22E)
  • P/B: 1.6x (FY21E), 1.3x (FY22E)
  • P/EV: 0.9x (FY21E), 0.8x (FY22E)
• Business Segment Valuation:
  • Life Insurance: Fair P/EV of 1.11, EV per share of 55.92
  • P&C Insurance: Fair P/B of 1.29, BVPS of 6.25
  • Banking (PAB): Shareholding of 57.94%, value per share of 15.13
  • Technology Business: Value per share of 12.99
  • Total Value (before conglomerate discount): 99.87
  • Conglomerate Discount: 15%
  • Final Target Price: HK$102.28

Financial Summary Highlights

Earnings Summary

• GWP (RMB mn): Increased steadily, with FY20E at 797,880, FY21E at 878,066, FY22E at 937,278
• Net Profit (RMB mn): Rose to 149,407 (FY19A), declined to 143,099 (FY20A), and is expected to increase to 152,047 (FY21E) and 167,694 (FY22E)
• EPS (RMB): Ranged from 6.02 (FY18A) to 9.49 (FY22E)
• Consensus EPS: Ranged from 7.47 (FY20E) to 10.10 (FY22E)

Balance Sheet Highlights

• Total Assets: Grew from RMB 8.22tn (FY19A) to RMB 9.53tn (FY20A), expected to reach RMB 10.26tn (FY21E) and RMB 11.34tn (FY22E)
• Total Liabilities: Increased from RMB 7.37tn (FY19A) to RMB 8.54tn (FY20A), expected to rise to RMB 9.10tn (FY21E) and RMB 9.996tn (FY22E)
• Shareholders' Equity: Rose from RMB 683.6bn (FY18A) to RMB 987.9bn (FY20A), projected to reach RMB 1.154tn (FY21E) and RMB 1.339tn (FY22E)

Key Ratios

• Net Investment Yield: 5.2% (FY18A), 5.1% (FY20A), expected to drop to 4.9% (FY21E) and 4.8% (FY22E)
• Total Investment Yield: 3.7% (FY18A), 6.9% (FY19A), 6.2% (FY20A), expected to fall to 5.1% (FY21E) and 5.0% (FY22E)
• ROAE: 20.9% (FY18A), 24.3% (FY19A), 19.9% (FY20A), expected to decline to 18.4% (FY21E) and 17.4% (FY22E)
• EV Growth: Expected to increase to 11.3% (FY21E) and 11.1% (FY22E)

Recommendations

• Ratings: BUY (maintained)
• Target Price: HK$102.28
• Potential Return: Over 11.5% based on current price of HK$91.70

Analyst Information

• Analyst: Wenjie Ding, PhD
• Contact: (852) 3900 0856 / (86) 755 2367 5597
• Email: dingwenjie@cmbi.com.hk

Disclaimer

• The report is not investment advice and is not suitable for all investors.
• No liability is assumed for any losses incurred from reliance on the report.
• Past performance does not guarantee future results.
• The report is intended for specific clients and not for public distribution.
• Conflicts of interest may exist due to investment banking relationships.