Main points of investment:

Event: the company disclosed that in the first quarterly report of 2020, its operating income was 17.613 billion yuan, down 22.3% from the same period last year, and its net profit was 384 million yuan, an increase of 16.7% against the trend. it is mainly due to the contribution of 178 million yuan in non-recurrent profit and loss (mainly due to 449 million yuan of non-operating income and expenditure generated by the conversion of some financial assets during the reporting period of Guohua Life Insurance, a holding subsidiary). The net profit of deducting non-return fell 36.1% to 206 million yuan compared with the same period last year, and the performance was in line with expectations.

Affected by the COVID-19 epidemic, Guohua Life's original premium income fell 24.6% year on year and began to become a regular employee in March. 1Q20 realized the original premium income of 14.381 billion yuan, down 24.6% from the same period last year, with monthly growth rates of-11.8%,-57.3% and 17.7%, respectively, from January to March. Due to the impact of COVID-19 's epidemic situation, the company's premium growth was poor, but it began to become a regular employee in March. In recent years, Guohua Life Insurance has adjusted the pace of its business, balanced its marketing layout throughout the year, and gradually reduced its dependence on insurance premiums in the first quarter of the year. 1Q20 Tianmao Group's consolidated report fee and commission expenses decreased by 34.6% compared with the same period last year. Looking to the future, with the in-depth transformation of the company's bancassurance and individual insurance channels, as well as the company to strengthen the layout of payment business, the renewal-driven healthy development model has been continued. We expect the growth rate of new premiums of Guohua Life Insurance in 2020 to be-16.3%, and the total scale premium income will be 53.169 billion yuan, which is basically the same as the same period last year.

The increase in 1Q20 net profit was mainly due to the contribution of the non-operating income and expenditure of the subsidiary Guohua Life Insurance in the current period, and the net assets returned to the home decreased slightly compared with the beginning of the year. Affected by the COVID-19 epidemic and large fluctuations in oil prices, the maturity yield of domestic 10-year government bonds showed a unilateral downward trend, falling from a low of 3.15% at the beginning of the year to 2.48%. The 1Q20 1Q19 and the 1Q20 CSI 300 index rose by about 29% and fell by about 10% respectively. 1Q20 Tianmao Group Consolidated statement Investment income + Fair value changes slightly increased by 0.5% to 2.77 billion yuan against the same trend last year, which is expected to be mainly contributed by the floating bond market. 1Q20 Guohua Life Insurance adjusted the accounting subject of some available-for-sale financial assets to long-term equity investment resulting in non-operating income of 449 million yuan, driving net profit growth against the trend. However, objectively, the net assets of Guohua Life at the end of the period fell slightly by 0.3% to 26.372 billion yuan compared with the beginning of the year, and the net assets of Tianmao Group's consolidated statement fell slightly by 0.2% to 21.187 billion yuan compared with the beginning of the year, mainly due to the negative other comprehensive income of the mother from 948 million yuan in the same period last year to-421 million yuan. It is expected that due to the floating loss of equity positions, the net profit for the whole year is still under downward pressure.

Investment suggestion: the company continues to optimize the business structure, enhance the new business value and promote the long-term and steady development of the company from the four aspects of "lengthening the debt duration, optimizing the payment structure, reducing the debt cost and increasing the protection content". However, it is still worth noting that the company still has room to improve in the construction of core agent channels, the layout of guaranteed products and the stability of the investment side. When we forecast the company's performance, we will not take into account the impact of major asset restructuring on performance. We maintain the profit forecast and expect the return net profit of Tianmao Group from 2020 to 2022 to be 10.45,15.38 and 1.914 billion yuan respectively, with year-on-year growth rates of-41.1%, 47.1% and 24.5%, respectively. The current stock price corresponds to the PE of 10.6X, 7.2X and 5.8X from 2020 to 2022, respectively. We use the segment valuation method to give the target price of 29.34 billion yuan combined with the average valuation of listed insurance companies, and continue to maintain the neutral rating.

Risk hint: the process of major asset restructuring is lower than expected, and the equity market fluctuates sharply.