Incident: China Taibao released its 2023 annual report. During the reporting period, it achieved revenue (net method) of 323.95 billion yuan, -2.5% year-on-year; realized net profit of 27.26 billion yuan, or -27.1% year-on-year. The net return on investment was 4.0%, -0.3pct year over year. The comprehensive return on investment was 2.6%, -1.5pct year over year.
ROE was 11.4%, -7.7 pct year over year.
Industrial insurance premiums have been growing steadily, and underwriting profits have exceeded expectations. During the reporting period, the company's total property insurance premiums were 18.34 billion yuan, +11.4% year-on-year, leading the industry in growth. Non-car insurance premium income increased significantly, accounting for 45% of total premium income, +19.1pct year-on-year. Auto insurance premium income was +5.6% year-on-year, accounting for 55% of total premium income. The company has also carried out an active layout in the new energy vehicle insurance business and optimized the risk management model. During the reporting period, the comprehensive underwriting cost rate for property insurance business was 97.7%, +0.8 pct compared to the previous year. The comprehensive underwriting payout rate was 69.1%, +1.1 pct compared to the previous year.
The transformation of life insurance “Changhang” has achieved remarkable results, driving good performance development. During the reporting period, the company's life insurance achieved operating profit of 27.257 billion yuan, +0.4% year-on-year. The life insurance business achieved large-scale premiums of 252,817 billion yuan, +3.2% year-on-year, including +3.7% year-on-year premiums for the new insurance scale and +3.0% year-on-year premiums for renewal. The value of the new business reached 10.962 billion yuan, +19.1% year over year, and the value ratio of the new business was 13.3%, +1.7 pct year over year. The company's life insurance business has achieved steady growth through diversified channel strategies. Among them, agent channels and banking insurance channels continue to contribute to the company's main sources of performance, while online sales channels have shown growth potential in digital transformation.
Fluctuations in the equity market put pressure on profit performance. During the reporting period, the company achieved net profit attributable to shareholders of the parent company of 27.257 billion yuan, or -27.1% year-on-year. The company's net profit declined, but its operating profit reached 35.518 billion yuan and remained almost stable (-0.4% year over year). Affected by equity market fluctuations, the company's net return on investment/ total return on investment/ comprehensive return on investment were 4.0%/2.6%/2.7%, respectively, -0.3 pct/-1.5 pct/+0.4 pct.
Investment advice: The company's “Changhang” transformation strategy and diversified channel construction have borne fruit and are expected to bring about sustainable growth. In 2024-2026, revenue is expected to increase 13%/12%/10% year on year, net profit to mother will increase 17% /15/ 13% year on year, and EPS will be 3.31/3.82/4.32 yuan/share. The PE corresponding to the closing price of 23.61 yuan on April 3 was 7.13/6.19/5.46 times. Maintain a “buy” rating.
Risk warning: widening interest spreads, increased market competition, economic fluctuations, changes in regulatory policies