Date of Report

22 October 2024

Broker Name

UOB Kay Hian

Company Description

Ping An Insurance Group is one of the largest insurance companies in China, offering a range of products and services across various segments, including life and health (L&H) insurance, property and casualty (P&C) insurance, banking, asset management, and technology.

Stock Data

• Share Price: HK$49.05
• Target Price: HK$69.00 (previously HK$64.00)
• Upside: +40.7%
• GICS Sector: Financials
• Bloomberg Ticker: 2318 HK
• Shares Issued: 7,447.6 million
• Market Cap: HK$1,034,543.7 million (US$133,101.4 million)
• 3-Month Average Daily Turnover: US$406.9 million
• 52-Week High/Low: HK$59.70 / HK$29.55

Recent Performance

Price Performance (%)

• 1 Month: +30.3%
• 3 Months: +46.9%
• 6 Months: +68.7%
• 1 Year: +29.6%
• Year-to-Date: +21.7%

3Q24 Results

• Group OPAT: Rmb 35,336 million (up 22.1% YoY)
• Net Profit: Rmb 44,563 million (up 151.3% YoY)
• First-Year Premium (FYP): Rmb 46,406 million (up 50.4% YoY)
• New Business Value (NBV): Rmb 12,840 million (up 110.3% YoY)

Segment Performance:

• L&H Insurance:

  • OPAT: Rmb 28,044 million (up 7.8% YoY)
  • Strong premium growth supported by a buying spree before the suspension of certain life insurance products.

• P&C Insurance:

  • OPAT: Rmb 4,014 million (up 455.2% YoY)
  • Driven by growth in insurance revenue and improved combined ratio.

• Banking:

  • Revenue: Rmb 8,028 million (down 2.8% YoY)
  • Facing earnings pressure due to sluggish revenue and rising credit risk.

• Asset Management:

  • OPAT: Loss of Rmb 3,612 million due to one-off impairment, with potential recovery linked to macroeconomic improvement.

Key Ratios

• NBV Margin: 27.7% (up 7.9 ppt YoY)
• Combined Ratio (P&C): 97.8% (improved by 4.0 ppt YoY)
• Net Interest Margin (Bank): 1.87%

Stock Impact

• Investment Performance:

  • The net investment yield decreased by 0.2 ppt YoY to 3.3%, while the comprehensive investment yield rose by 1.3 ppt YoY to 5.0%, exceeding long-term return assumptions.

• Sales Outlook:

  • Management anticipates September and October as traditionally weaker months, but plans to maintain focus on participating and traditional protection products.

• Dividend Policy:

  • Linked to OPAT; management expressed a preference for cash dividends among shareholders.

Earnings Revision/Risk

• OPAT Forecasts:
  • Increased by 6.6% for 2024, 3.4% for 2025, and 1.8% for 2026 due to stronger performance in the life and P&C segments.

Valuation/Recommendation

• Recommendation: Maintain BUY with a higher target price of HK$69.00. The target price reflects a 0.77x valuation of the 2024 group embedded value, indicating that Ping An trades below its historical average P/EV of 0.55x with a 5.0% dividend yield.