Tianmao Group transforms finance through the layout of insurance. Since 2015, the company has raised funds through two non-public offerings to acquire shares in Guohua Life Insurance and Axa balance, taking advantage of the increased demand for insurance to comprehensively develop life and property insurance. Chinese residents pay more and more attention to insurance products. The proportion of insurance products in residents' financial assets increased from 8% in 2004 to 10% in 2014. The transformation of residents' wealth structure catalyzes insurance demand. At the same time, the aging of China's population is accelerating. From 2010 to 2014, the proportion of people aged 65 and above increased by more than or equal to 0.25% over the same period last year. In 2014, the proportion of people aged 65 and over reached 10%. In the next 5-10 years, the aging trend in China will continue, and demographic changes will lead to rigid insurance demand (WIND data). In the future, the company will combine Guohua Life Insurance and Axa balance to form a development model dominated by finance and insurance, supplemented by the original main chemical industry and medical treatment.
Guohua Life Insurance promotes Tianmao Group to turn losses into profits. In February 2016, Tianmao Group completed the acquisition, capital increase and merger of Guohua Life Insurance. Tianmao Group's shareholding in Guohua Life Insurance increased from 7.14% to 51% (company announcement, the same below).
(1) Guohua Life Insurance assets-driven liabilities, achieving rapid growth in scale. As a small and medium-sized insurance company, Guohua Life chose the path of "asset-driven liabilities" and made efforts in Internet finance. The sales of universal insurance products reached 100 million yuan in three days in December 2012. in 2015, Guohua Life launched the concept of "Internet + pension" together with Alipay Wallet. In 2015, Guohua Life achieved an investment income of 5.6 billion yuan, an increase of 49 percent over the same period last year, and insurance premium income of 23.7 billion yuan, a substantial increase of 572 percent over the same period last year, ranking 13th among Chinese life insurance companies.
Liu Yiqian through Tianmao Group to increase the holdings of Guohua Life Insurance, Guohua Life Insurance is expected to enhance its overall strength.
(2) Guohua Life Insurance promoted Tianmao Group to turn losses into profits in the first quarter of 2016. According to the company's performance forecast, in the first quarter of 2016, Tianmao Group's net profit belonging to shareholders of listed companies reached 750 million yuan to 800 million yuan, turning losses into profits. Guohua Life Insurance belongs to Tianmao Group with net profit of about 300 million yuan, accounting for more than 40% of the net profit.
Axa balance has a unique market competitive advantage. In March 2016, Tianmao Group issued a pre-plan for a non-public offering of A shares to acquire a stake in Axa balance. After the acquisition, Tianmao Group's stake in Axa balance will reach 50%.
(1) Axa balance is in good condition and its net profit has increased substantially. In 2015, Axa balance's premium income and investment income were 7.3 billion yuan and 540 million yuan respectively, a year-on-year growth rate of 10% and 52% respectively. In 2015, Axa balance's net profit exceeded 200 million yuan, nearly 12 times that of 2014.
(2) Axa balance has a unique competitive advantage in terms of market position and shareholder resources. In 2015, the premium income of Axa balance ranked first in the total income of China's foreign property insurance companies, accounting for 41% of the total income, and the market position advantage is obvious. Axa Switzerland, the shareholder of Axa balance, is a wholly-owned subsidiary of the world's leading insurance company Axa Group of France. In the future, the company will take advantage of shareholders to enhance its competitiveness.
Major shareholder Xinliyi Group actively arranges financial control.
(1) the acquisition of Changjiang Securities by Xinliyi Group is rich in financial control resources. According to a 2015 announcement from Changjiang Securities, Xinliyi Group has been granted a 14.72% stake in Changjiang Securities held by Haier Investment. the acquisition was completed in early 2016, and Xinliyi Group has become the largest shareholder of Changjiang Securities. At the same time, Xinliyi Group controls many enterprises, including Tianmao Group, Lijiaying, Qianqian Internet Finance and Xinliyi Real Estate Investment, actively arranging financial control. As a major shareholder, Xinliyi Group participated in the non-public offering of Tianmao Group. The Group's rich financial control resources and strong capital strength make the successful implementation of the non-public offering of Tianmao Group possible.
(2) Tianmao Group may achieve structural optimization and profit improvement with the help of Xinliyi Group, a major shareholder in the future. As a listing platform under Xinliyi Group, Tianmao Group has the possibility of injecting financial assets of Xinliyi Group. In the future, Tianmao Group's insurance sector may form coordinated development with the securities, real estate and Internet finance held by Xinliyi Group to achieve structural optimization and profitability improvement.
Investment advice: buy-An investment rating, 6-month target price of 11 yuan. We estimate that the EPS of the company from 2016 to 2018 is 0.29,0.40,0.50 respectively.
Risk hint: the macroeconomic downturn exceeded expectations and the non-public offering failed.