■ 1H18 NBV YoY-growth turned positive; Life agent headcount up 1% HoH
■ 1H18 net profit up 33.8% and total comprehensive income up 8.9% YoY
■ Maintain BUY
Overall 1H18 results positive
1) 1H18 shareholders’ net profit totalled RMB58.1bn (EPS RMB3.26), up 33.8% YoY. ROE (not annualized) came in at 11.7%; 2) 1H18 life and health NBV came in at RMB38.8bn, up 0.2% YoY compared with down 7.5% YoY in 1Q18. Life agent headcount up 1% HoH. NBM on FYP growth from 34.5% in 1H17 to 38.5% in 1H18; 3) P&C insurance posted a stable combined ratio of 95.8%, compared with 95.9% in 1Q18. Overall, we like Ping An’s 1H18 results for its improved performance and high ROE. In particular, its NBV growth turned positive as we expected, and it managed to maintain a stable life insurance agent force in 1H18. Ping An’s agency-channel FYP in July increased 15% YoY. We expect Ping An’s NBV growth to further improve at 2018-end.
1) Previously the management indicated that NBV growth would improve QoQ in 2018, and targeted a positive NBV growth for 2018. This is evidenced by its 1H18 results; 2) despite stable P&C combined ratio, previously the mgmt. indicated they were closely watching the development of P&C market as competition may further intensify due to marketization of automobile insurance; and 3) Fintech and healthtech business are making larger contribution to the group’s operating profit.
Valuation and risk
Stock is trading at ~2.0x 2018E P/B. We maintain our Buy rating with TP HK$109.0 representing ~1.7x 2018E P/EV for the company, given that: 1) we like Ping An’s 1H18 results as it delivered enhanced life product structure, improved NBV growth and high ROE; 2) with its extensive agent network, Ping An has the competitive advantage in selling protection-type life insurance. We expect Ping An’s NBV growth to further improve at 2018-end; and 3) valuation is not demanding, as it is trading at low end of its historical valuation range.
Key catalyst: improved NBV growth at 2018-end. Key downside risks: adverse capital market, higher-than-expected life insurance competition.