Core views:
The company released its 23rd annual report: net profit to mother in 2023 was -22.8% YoY, NBV +36.2% YoY.
NBV +36.2% in 23 years (assuming before the adjustment, same below). Affected by strong demand for residents' savings, 3.5% product delisting, and the smooth pace of Q4 business, the Q1/Q2/Q3/Q4 single-quarter growth rates were 8.8%/75.5%/21.3%/91.4%, respectively. Among them, Q2-Q3 benefited from 3.5% product delisting, and Q4, due to regulatory adjustments to the business pace, some insurance policies took effect during the current period.
The premium for the first year of '23 was +38.9%, while NBVM was -0.4pct to 23.7% year over year, and the decline narrowed from quarter to quarter. The changes in personal insurance/banking insurance NBVM were -4.3pct/+0.9pct, respectively. Looking ahead to 24 years, benefiting from strong savings demand and the trend of agent declines, it is expected that new orders and values from individual insurance channels will remain stable, while the increase in banking insurance value ratios will make up for the impact of the integration of bank reporting on premiums.
Assuming that the adjustment led to the Group's EV -2.4% YoY (life insurance -5%) due to a decline in long-term interest rates, Ping An lowered the return on investment by 50BP to 4.5%, and lowered the risk discount rate by 150BP to 9.5% during the same period (the reduction was in line with expectations), causing the hypothetical change to drag down EV -6.1%, which is the main reason for the decline in EV growth. In addition, the operating profit of the non-life insurance business contributed +0.9%, compared to -1.8pct in the same period last year, mainly due to the financial insurance and asset management business sector; while NBV led 2.5% growth, compared to last year +0.1 pct for the same period, and the difference in return on investment was +0.9 pct compared to the same period last year.
Due to the accelerated clearance of risks, the growth rate of net profit was lower than expected. Net profit attributable to mother in 2023 was -22.8% YoY, up from the 1-3Q decline (-5.6%). Mainly, the asset management sector accrued provisions, and risks are being cleared at an accelerated pace; OPAT was -19.7% YoY, and CSM balance was -6.1% YoY. Among them, CSM adjustments due to changes in discount rates were the main factors in the decline in CSM. However, it is worth noting that the company's annual dividend was 2.43 yuan/share, +0.4% year-on-year, and maintained steady growth for 12 consecutive years.
Profit forecast and investment advice: EPS is expected to be 5.1/5.8/6.4 yuan for 24-26. The EV law gives the company a valuation of 0.7 XPEV for A shares in 2024 (0.6 XPEV for H shares), corresponding to a reasonable value of 56.6 yuan/share (HK$52.6 for H shares), maintaining the “buy” rating of the company's A/H shares.
Risk warning: New order sales fall short of expectations, long-term interest rates have declined, and the scale of manpower has declined.