中国人寿(02628.HK):1Q18 net profit to grow by 110-130% YoY; Maintain BUY

2018-04-24 09:33 港股研报君 阅读 1424

机构:招商证券

评价:BUY 

目标价:36.4 

1Q18 net profit to increase by 110-130% YoY

 China Life (2628 HK, Buy) released positive profit warning that its 1Q18 recurring net profit may increase by 110% to 130% YoY. The estimated increase in 1Q18 net profit is mainly attributable to the changes in the discount rate assumption of reserves of the traditional insurance contracts. China Life will release its formal 1Q18 results on April 26. 

In-line with our earlier view on the sector 

The 750D-MA for the 10Y government bond generally went down in 2017 and negatively impacted 2017 operating profit by 21%, 19%, 49%, and 30% for China Life, Ping An, NCI, and CPIC, respectively. However, there was a turnaround of the 750D-MA since 4Q17. Assuming China’s 10Y government bond yield to remain at 3.5215% for the rest of year 2018, the 750D-MA will rise continuously in 2018. This will reduce the required reserve fund and release the accounting profit for major life insurance players. We maintain ‘Overweight’ rating on China life insurance sector. China insurance sector is trading at 1.6x P/B, and it has underperformed HSI by 1.3% in 12 months.  

Valuation and risk 

The stock is trading at ~0.6x 18E P/EV. Our TP (currently HK$36.4) and 2018 financial forecasts are under review. Though its NBV growth may slow down in 2018, we maintain ‘Buy’ for China Life, given that: 1) the company is trading at only ~0.6x 18E P/EV, a large discount to its average P/EV over the past five years of ~1.05x; and 2) as a pure life company, it greatly benefits from the turnaround 750D-MA for the 10Y government bond. Key catalyst: better-than-expected NBV growth in 1Q18 and 1H18. Key downside risks: adverse capital market, lower-thanexpected NBV growth. 

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