Core views:
The company disclosed its quarterly report: net profit to mother +1.1% YoY, NBV +30.7% YoY.
Net profit returned to mother in the first quarter was +1.1% year-on-year. It still achieved growth in the context of a high base, exceeding market expectations. On the one hand, investment income exceeded market expectations. First, the year-on-year increase in investment assets was 4.2% over the beginning of the year. Furthermore, the equity market rose slightly, and the fair value of fixed income assets in FVTPL assets increased. The total return on investment was only -0.1 pct to 1.3% year over year (unannualized). The net return on investment remained flat year on year due to the company's active allocation of high-dividend assets; on the other hand, the year-on-year improvement in the comprehensive cost ratio of financial insurance is expected to drive the improvement in underwriting profit, which comprehensively drove the company's net profit growth in the first quarter to exceed expectations in the context of a high base.
The significant improvement in the value ratio of new businesses drove NBV to a sharp increase of 30.7%, and the estimated caliber of the same period last year is not traced. The growth rate is expected to be even higher after traceability. Benefiting from strong demand for savings from residents and the effects of the company's reform, although the integration of banking insurance channels led to a year-on-year ratio of -21.8% of new orders, individual insurance channels were +31.3% year-on-year, driving the overall new order ratio +0.4%; it is worth noting that in the first quarter, NBVM = 15.8%, +3.7pct year over year. In the context of adjusting return on investment assumptions, the company's value ratio still increased dramatically, which is the main reason why NBV's growth rate exceeds expectations. It is expected to be mainly driven by product restructuring and an increase in the value ratio of banking insurance channels (reduced processing fees and commissions by integrated reporting). Looking ahead to the whole year, although the base figure will rise after the second quarter, considering the current strong demand for savings from residents and the improvement in the quality of the company team, it is expected that the drop in premiums for the whole year will be better than previously anticipated, and the increase in value ratio is the core factor driving the positive growth of NBV throughout the year.
Financial insurance COR was -0.4 pct to 98% year over year, and the improvement in underwriting profitability exceeded expectations. Financial insurance premiums were +8.6% compared to the same period. Car insurance strengthened cost control, and the development of non-car insurance volume and quality promoted COR improvements.
Profit forecast and investment advice: The 24-26 EPS is expected to be 3.47/4.66/5.43 yuan/share, using the EV method, a reasonable valuation of 0.55XPEV (H shares 0.35X), and the corresponding reasonable value is 32.68 yuan/share (HK$22.47 per share for H shares), maintaining the “buy” rating for A/H shares.
Risk warning: New premiums continue to decline, long-term interest rates are declining, and team size is declining beyond expectations.