20250328-招银国际-中国人寿-02628.HK-4Q_slowdown_as_expected__DPS_exceeded_＞50__5页_932kb

China Life (2628 HK) Summary

Core Content

China Life (2628 HK) reported full-year results for FY24 that were in line with expectations, with net profit rising 132% YoY to RMB 106.9bn under IFRS and 107% YoY to RMB 108.9bn under ASBE. However, the fourth-quarter (4Q) performance was below expectations, with net profit declining 70% YoY to RMB 2.4bn, at the low end of the forecast. The company's net asset value (NAV) dropped 10% QoQ in 4Q24 to RMB 509.7bn, primarily due to the 49bps decline in 10-year Chinese government bond yields.

Main Points

• Full-Year Performance:

  • Net profit increased significantly, exceeding RMB 100bn for the first time on an annual basis.
  • Net profit under IFRS reached RMB 108.9bn, surpassing the forecast of RMB 109bn.
  • Net profit attributable to shareholders was RMB 106.9bn under IFRS and RMB 108.9bn under ASBE.

• NBV Growth:

  • FY24 NBV grew 24.3% like-for-like to RMB 45.8bn, outperforming the forecast of 19%.
  • Agency and other NBV margins improved by 5.0% and 10.6% respectively, contributing to the better-than-expected NBV growth.
  • NBV was negatively impacted by revised economic assumptions, with total NBV down 26%, agency NBV down 24%, and others NBV down 50%.

• Investment Performance:

  • Investment income surged due to realized gains from FVOCI debt (+133%), unrealized gains from FVTPL assets (+RMB 152bn YoY), and dividends from stocks under FVOCI (+32%) and FVTPL (+16%).
  • Total investment income for FY24 reached RMB 308bn, up 150% YoY.
  • 4Q investment income was RMB 47bn, up 140% YoY, driven by a 3.1% increase in total yield to 5.5%.

• EV Impact:

  • EV was almost unaffected (-0.5%) due to positive investment variance (RMB 64bn) and MTM adjustments (RMB 106.5bn), which offset the decline from assumption changes.
  • EV rose 11.2% YoY to RMB 1.4tn.

• Forward Outlook:

  • The company expects investment seasonality to ease and NBV to grow at 14% in FY25E with heightened NBV margins.
  • FVOCI debt and equities allocations increased by 26% and 25% respectively.
  • The stock price may face short-term pressure due to dividend expectations and fluctuations in net profit.

• Valuation Metrics:

  • The stock is trading at FY25E 0.3x P/EV and 0.7x P/B, with a 3yr forward ROE of >14%.
  • EPS estimates for FY25-27E are revised up by 7%/11%/15% to RMB 2.86 / 3.12 / 3.39.
  • Dividend yield is projected to rise to 7.0% in FY27E, with DPS increasing 51.2% YoY to RMB 0.65.

Key Information

• 4Q24 Performance:

  • Net profit declined 70% YoY, underperforming the forecast.
  • NAV dropped 10% QoQ due to interest rate declines.

• Investment Strategy:

  • Revised economic assumptions included a 50bps cut in long-term investment return to 4.0% and risk-adjusted discount rates of 8.0% / 7.2% for traditional and floating-rate products.
  • FVOCI debt and equities allocations increased, enhancing investment returns.

• Shareholding and Performance:

  • BlackRock, Inc. and Citigroup Inc. hold 6.4% and 6.0% of shares respectively.
  • Share price performance showed 5.4% gain over 3 months but -10.2% relative to the market.

• Analyst Recommendation:

  • Maintain BUY with a target price of HK$20.0, implying FY25E 0.4x P/EV and 0.92x P/B.

Financial Highlights

Analyst Certification and Disclosures

• The analyst certifies that the views expressed reflect their personal opinions and no compensation is tied to the report.
• The analyst has not traded in the stock within 30 days prior to the report's issue and will not trade within 3 business days after.
• The report is not an offer to buy or sell and not liable for any loss incurred by reliance on its content.

CMBIG Ratings

• BUY: Stock with potential return of over 15% over next 12 months.
• HOLD: Stock with potential return of +15% to -10%.
• SELL: Stock with potential loss of over 10%.
• OUTPERFORM: Industry expected to outperform the market.
• MARKET-PERFORM: Industry expected to perform in-line with the market.
• UNDERPERFORM: Industry expected to underperform the market.

Important Disclosures

• The report is not tailored to individual investors and does not guarantee future performance.
• CMBIGM does not provide investment advice and recommends consulting a financial advisor.
• The report is intended for specific recipients and not for public distribution.

Related Reports

1. China Life (2628 HK) - 4Q net profit could decline despite better capital market, Jan 27, 2025
2. China Life (2628 HK) - 3Q NPAT boosted by net fair value gains; expect resilient full-year NBV upswing, 5 Nov, 2024
3. China Life (2628 HK) - Strong lift in bancassurance NBV margin; investment income may continue to rebound in 2H24, Sep 2, 2024
4. China Life (2628 HK) - Highest VNB growth in years; net profit decline narrowed on track, May 2, 2024
5. China Life (2628 HK) - 4Q net loss markedly narrowed; VNB grew in low-teens despite revised EV assumptions, Apr 8, 2024
6. China Life (2628 HK) - 3Q NP dragged by investment setbacks; first-in-sector steady agent scale props up 2024 NBV, Oct 31, 2023