Main points of investment:
Layout of insurance, performance to turn losses into profits. In 2015, through a non-public offering plan, the company raised a net capital of 9.794 billion yuan, acquired a 43.86% stake in Guohua Life and increased its capital. On March 16, 2016, Tianmao Group formally acquired part of Guohua Life Insurance to become the controlling shareholder, with a 51% stake. In July 2016, the company once again announced a non-public offering plan, which plans to raise no more than 4.845 billion of the total funds to increase the capital of Guohua Life Insurance. With the completion of two capital increases by the company and related shareholders, the capital invested by Guohua Life Insurance shareholders will reach 17.3 billion yuan. In the first quarter of 2016, the company's consolidated financial statements showed a net profit of 790 million yuan for shareholders of listed companies, a significant improvement over the loss of 20.41 million yuan in the same period last year.
Guohua Life Insurance has entered a stable profit period, with a gradual transition from universal insurance to return protection. In the environment where small and medium-sized insurance companies pay attention to universal insurance to drive premium growth, the company has shifted its strategic focus to the debt side. From January to June 2016, Guohua Life Insurance realized the original insurance premium income of 20.4 billion yuan, an increase of 84% over the same period last year; the new payment scale of investment funds for policyholders was 12.037 billion yuan, an increase of 15% over the same period last year, and the original insurance premium income has far exceeded the scale of universal insurance. The rate of return on investment of Guohua Life Insurance is much higher than the industry average, and the high position of equity allocation is its bright spot. High equity positions can bring greater performance flexibility. In the past three years, the rate of return of Guohua life insurance funds is higher than the average rate of return of insurance industry funds, and the ability to use funds is significantly higher than the average level of the industry. It is estimated that at the end of 2014 and the end of 2015, Guohua Life shares accounted for 23% and 30% respectively. Guohua Life Insurance is a private company with great flexibility, reflecting its active and flexible operating characteristics.
Major shareholder Xinyi Group has rich experience in capital operation and actively arranges financial control, which is expected to inject other assets of Xinyi Group, opening up growth space for the company and enhancing profitability. In addition to the insurance sector, Xinliyi Group also took a stake in Changjiang Securities and Xinliyi Real Estate Investment. Tianmao Group insurance plate and Xinliyi Group's securities, real estate and other sectors are expected to share resources and interests, forming a synergistic effect. As the listing platform of Xinliyi Group, Tianmao Group has the possibility of injecting financial and real estate assets into Xinliyi Group. In addition, the company also holds a 9.25% stake in Axa balance, and has a strong willingness to purchase and distribute the property life insurance platform in the future, and enjoys the coordination of property life insurance resources.
For the first time, it covers the rating of "overweight" and is optimistic about the growth potential brought about by the company's transformation. The segment valuation method is used to value Guohua Life Insurance, Chemical and Pharmaceutical Business and Axa balance respectively, and the reasonable market capitalization is 42 billion, 6 billion and 1.5 billion respectively. Taking into account Guohua Life's net assets of 10.4 billion yuan at the end of 2015, coupled with Guohua Life's expected capital increase and the increase in net assets through operating surplus, Guohua Life's net assets are expected to be 27.7 billion yuan by the end of 2016. taking into account the flexibility and growth potential of small and medium-sized insurance companies, Guohua Life is given a valuation premium of 3 times PB, which gives Guohua Life a reasonable market capitalization of 42 billion yuan. Tianmao Group is given a target market capitalization of 49.5 billion, corresponding to the expected non-public offering of 700 million shares, with a total of 4.957 billion shares after the completion of the additional offering, with a target price of 10 yuan, giving the company an "overweight" rating for the first time.