20250401-招银国际-中国财险-02328.HK-Optimized_CoR_guidance_beat_expectations_6页

PICC P&C (2328 HK) Summary

Core Content Overview

PICC P&C (2328 HK) reported FY24 financial results, which showed a net profit of RMB 32.2bn, up 30.9% YoY, aligning with forecasts. However, the full-year combined ratio (CoR) was 98.8%, slightly higher than the previous year, due to an increased loss ratio (+2.4pct) that outpaced the improvement in the expense ratio (-1.4pct). Despite this, the company beat its FY25E CoR guidance, with auto and non-auto CoR expected to be -96% and -99%, respectively, which is better than the previous two years’ guidance of -97% and -100%.

The company’s management highlighted that net claims in FY24 reached RMB 15.6bn, a 51.2% increase from the recent 5-year average and a 32% rise YoY. Underwriting profit declined 44% YoY to RMB 5.7bn, with a UW loss of RMB 730mn in Q4.

Key Financial Highlights

• Net Profit: RMB 32.2bn (FY24), up 30.9% YoY.
• EPS (Reported): RMB 1.45 (FY24), up to RMB 1.58 (FY25E), indicating a 6% YoY increase.
• Dividend Yield: 4.0% (FY24), expected to rise to 4.7% (FY25E).
• ROE: 13.0% (FY24), projected to increase to 13.5% (FY25E) and 14.0% (FY27E).
• P/B Ratio: 1.2 (FY24), projected to decline to 1.1 (FY25E).
• Target Price (TP): HK$15.8 (FY25E), up from HK$14.0, implying a 9.9% upside from the current price of HK$14.38.

Key Forecasts

Investment Income and Performance

• Investment Income: Surged 68% YoY to RMB 34.9bn, driven by fair value gains from FVTPL equities (+RMB 12.8bn YoY).
• FVOCI Stocks: Grew 40.4% YoY to RMB 39.2bn, representing 6% of the insurance fund portfolio.
• Bond Investments: Increased 49% YoY to RMB 141.3bn.
• Dividends from FVOCI Stocks: Rose 6.7% YoY to RMB 4.1bn.
• Net-off Impact on A/L to NAV: 1.9% (up 1.2pct YoY), better than most peers.

Valuation Metrics

• P/B Ratio (FY25E): 1.19x, up from 1.09x.
• Forward 3-Year ROE: 13.5%.
• Long-Term Growth: 3.0%.
• Underwriting Cycle Discount: -25%.
• Fair Value per Share (HK$): 15.6 (FY25E), up to 15.8 (new TP).

Share Performance and Structure

• Market Cap (HK$ mn): 319,840.0.
• Avg 3-Month Turnover (HK$ mn): 448.7.
• 52-Week High/Low (HK$): 14.88 / 9.09.
• Total Issued Shares (mn): 22,242.0.
• Shareholding Structure:
  • Citigroup Inc.: 9.7%
  • JPMorgan Chase & Co: 6.0%

Analyst Ratings and Recommendations

• CMBIGM Rating: BUY.
• Reason: Positive outlook on cost-effective CoR management and sufficient reserves to handle potential catastrophes. Revisions to FY25-27E EPS forecasts by 6% / 11% / 18%, leading to a new TP of HK$15.8.

Risk and Disclaimer

• Investment Risks: Market volatility, potential for underperformance, and uncertainty in future returns.
• Analyst Certification: The analyst certifies that the views expressed are personal and not influenced by compensation.
• Conflict of Interest: CMBIGM may have positions or act as principal in the securities mentioned, which could affect objectivity.
• Distribution Restrictions: The report is intended for specific investors and may not be distributed to others without consent.

Related Reports

• 3Q CoR miss dragged by non-auto claims.
• CoR sequentially improved turning to positive 2Q net profit growth.
• 1Q24 catastrophe-induced claims fully released.
• Non-auto CoR better than expected.
• Expect FY23E CoR guidance met.

Conclusion

PICC P&C (2328 HK) is positioned for continued growth with improved CoR management and strong investment performance. The revised EPS forecasts and new TP of HK$15.8 reflect confidence in the company’s ability to navigate challenges and deliver returns. The BUY recommendation is maintained, with a 9.9% upside potential. Investors are advised to seek independent financial advice and consider the risks involved.