Ping An Insurance Group (2318 HK) Summary
Core Content
Ping An Insurance Group (2318 HK) reported positive results for the first half of 2018 (1H18), with notable improvements in its New Business Value (NBV) growth and profitability. The company maintained a "BUY" rating, with a target price of HK$109.00, representing a 55% increase from the previous price of HK$70.35. The report highlights Ping An's strong performance, competitive advantages, and favorable valuation metrics.
Main Points
1. Financial Performance in 1H18
- Shareholders' Net Profit: RMB58.1bn (EPS: RMB3.26), up 33.8% YoY.
- Total Comprehensive Income: Up 8.9% YoY.
- ROE (not annualized): 11.7% in 1H18.
- Life NBV: RMB38.8bn, up 0.2% YoY, marking a positive trend after a 7.5% decline in 1Q18.
- Life Agent Headcount: Increased by 1% HoH.
- NBV Margin on FYP: Rose from 34.5% in 1H17 to 38.5% in 1H18.
- P&C Combined Ratio: Stabilized at 95.8%, consistent with 1Q18.
2. Management Guidance
- NBV Growth: Management anticipated improved growth QoQ in 2018, and the 1H18 results support this expectation.
- P&C Market Watch: Despite a stable combined ratio, the company is closely monitoring the P&C market due to increased competition from the marketization of automobile insurance.
- Fintech and Healthtech Contributions: These segments are playing a larger role in contributing to the group's operating profit.
3. Valuation
- P/B Ratio (2018E): ~2.0x, which is at the lower end of its historical range.
- P/EV Ratio (2018E): ~1.09x, indicating a relatively low valuation.
- Target Price (2018E): HK$109.00, implying a P/EV of ~1.7x.
- Price Performance: The stock had a 1-month return of -1.5%, 6-month return of -18.6%, and 12-month return of +20.2%.
- Peer Comparison: Ping An's valuation is considered reasonable compared to its peers.
4. Key Catalysts and Risks
- Catalyst: Improved NBV growth by the end of 2018.
- Downside Risks: Adverse capital market conditions and higher-than-expected competition in life insurance.
Key Financial Metrics
1. Financials (Year ended 31 Dec)
| Metric |
2016 (RMBmn) |
2017 (RMBmn) |
2018E (RMBmn) |
2019E (RMBmn) |
2020E (RMBmn) |
| Total Revenues |
774,488 |
974,570 |
1,158,387 |
1,325,302 |
1,526,271 |
| Shareholders' Net Profit |
62,394 |
89,088 |
96,689 |
114,450 |
133,650 |
| EPS (RMB) |
3.49 |
4.99 |
5.29 |
6.26 |
7.31 |
| BVPS (RMB) |
20.98 |
25.89 |
28.61 |
34.88 |
42.19 |
| ROE (%) |
17.4 |
20.8 |
19.4 |
19.7 |
19.0 |
2. Financial Ratios
| Metric |
2016 |
2017 |
2018E |
2019E |
2020E |
| EPS (RMB) |
3.49 |
4.99 |
5.29 |
6.26 |
7.31 |
| BVPS (RMB) |
20.98 |
25.89 |
28.61 |
34.88 |
42.19 |
| Life NBV per Share (RMB) |
2.78 |
3.68 |
4.11 |
4.59 |
5.31 |
| Life EV per Share (RMB) |
19.71 |
27.15 |
33.23 |
40.24 |
48.48 |
| ROE (%) |
17.4 |
20.8 |
19.4 |
19.7 |
19.0 |
| GWP and Policy Fees Growth YoY |
21.6% |
28.9% |
31.1% |
17.5% |
16.8% |
| NBV Growth YoY |
32.2% |
32.6% |
11.5% |
11.7% |
15.7% |
| NBV Margin on FYP |
37.4% |
39.3% |
43.9% |
43.3% |
43.6% |
Shareholding Structure
| Shareholder |
Percentage |
| CHAROEN POKPHAND GROUP |
29.8% |
| JPMORGAN CHASE&CO |
6.5% |
| Free Float |
69.0% |
Key Data
| Metric |
Value |
| 52-week Range (HK$) |
58.85–98.85 |
| Market Cap (HK$ mn) |
1,286,015 |
| Avg. Daily Volume (mn) |
51.93 |
Investment Ratings
| Rating |
Definition |
| OVERWEIGHT |
Expect sector to outperform the market over the next 12 months |
| NEUTRAL |
Expect sector to perform in-line with the market over the next 12 months |
| UNDERWEIGHT |
Expect sector to underperform the market over the next 12 months |
| Company Rating |
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 |
Conclusion
Ping An Insurance Group demonstrated strong financial performance in the first half of 2018, with positive NBV growth and improved profitability. The company is well-positioned due to its extensive agent network and the growing contribution from fintech and healthtech. Its valuation is considered attractive, and the report maintains a "BUY" rating, anticipating further improvement in NBV growth by the end of 2018. However, the report also highlights potential risks such as adverse capital market conditions and intensified competition in life insurance.
