The Zhitong Finance App learned that CICC released a research report stating that China's Taiping (00966) “outperform the industry” rating was maintained. As the new guidelines switched out the impact of reserves and absorbed investment losses, it raised 2023e/2024e EPS by 22.6%/9.6% to HK$2.5/3 per share. Considering the liquidity and other effects of Hong Kong stocks, the target price is HK$13.8. The company's 1H23 new business value (RMB caliber) was +28.5%, which was basically in line with the bank's expectations and was 6% lower than market expectations; the comprehensive cost ratio of domestic financial insurance business was +2.4ppt to 97.6% year on year; the Group's net profit (HKD caliber) was +20.5%, better than the bank's and market expectations, mainly due to better investment performance in the first half of the year.
The main views of CICC are as follows:
The value of the new business is basically in line with expectations, and the quality of the business remains leading.
Under the high prosperity and value strategy of savings insurance, the value of the company's new business in the 1H23 RMB caliber was +28.5% year-on-year, which is basically in line with the bank's expectations. By channel, the agent/banking insurance channel's new business value (RMB caliber) was +32.0%/8.2%, and the new business value ratio (disclosed value) was +1.2/-2.5ppt to 18.6%/3.6%, respectively. The number of 1H23 agents decreased by 18.1% from the beginning of the year to 320,000, including +57.1% per million people to 2,673, and the number of promoted business managers +94.7% to 2,666; the average monthly production capacity of new hires in that year was +72.9%, and the average monthly production capacity per capita of supervisors was +34.7%, and the production capacity of agents at all levels improved markedly. The 13-month/25-month continuation rate for managers in the first half of the year was 96.1%/91.6%, while banking insurance was 98.1%/96.8%, respectively, which continues to be at an excellent level in the industry.
Under the new accounting standard, the comprehensive cost ratio for domestic financial insurance was +2.4ppt to 97.6% year on year. The bank expects a low payout base, mainly due to the epidemic last year. The overall profit situation of Taipingcai is better than the bank's expectations.
Strong investment performance and retroactive adjustments to IFRS9 led to higher net profit than expected. The company's net, total, and comprehensive investment returns under the new 1H23 standard were 3.63%/3.89%/5.92% respectively. Thanks to the company's high score, Hong Kong stocks outperformed the Hang Seng Index (including interest) 11.42ppt, and the group's overall equity outperformed Shanghai and Shenzhen 300 2.19ppt. In addition, the company used a classification overlap method for financial assets to trace data for the same period last year. The total return on investment in 1H22 fell 1.4ppt from 3.35% of the old caliber to 1.98% of the new caliber. After restatement, the comparable investment performance base was lower, driving 1H23's net profit +20.5% to 5.22 billion HKD; in the first half of the year, the company's shareholders' equity (RMB caliber) was +0.9% to 75.63 billion yuan.
Life insurance EV (RMB caliber) +8.4% month-on-month, and contract service marginal +1.4% month-on-month. The bank is expected to be mainly driven by better new business performance, and the contribution of investment bias to EVs has also improved markedly.
Optimistic about the company's valuation repair opportunities. Since 2021, Taiping NBV's growth rate has continued to lead the industry, and many indicators have remained steady under industry headwinds. As a result, the company currently only traded 0.12x 23e P/EV due to the previous industry downturn and historical business development fluctuations. The bank believes that the company has been greatly underestimated. As the company and the industry's new business improvement trends become more and more clear, the bank is optimistic about its valuation repair opportunities.
Risk warning:The increase in premiums for new orders fell short of expectations; long-term interest rates fell sharply; and the capital market fluctuated greatly.