Introduction to this report:
Net profit for 24Q1 was 1.1% year-on-year. It is expected to be driven by investment improvements and income tax relief; the transformation of Changhang will drive NBV growth; COR improvements in industrial insurance and stable investment income. Cai Qiang's proposed appointment as a non-executive director will benefit the improvement of the corporate governance structure.
Key points of investment:
Maintaining the “increase in holdings” rating, maintaining the target price of 35.60 yuan/share, corresponding to the 24-year P/EV of 0.60 times: Thanks to a firm high-dividend strategy, the company's Q1 investment income was relatively stable when the market environment fluctuated, and combined with the benefits of income tax relief, net profit to mother in the first quarter of '24 was 1.1% year-on-year, exceeding market expectations. Based on investment-side improvements, the 2024-2026 EPS was 3.66 (3.44, 6.5%) /4.53 (4.24, 6.9%) /5.68 (5.28, 7.6%) yuan.
The transformation of Changhang has shown results in the rapid growth of NBV. The profit from industrial insurance underwriting exceeds expectations, and the return on the investment side is stable: 1) 24Q1 life insurance NBV was 30.7% year-on-year, exceeding market expectations. It is expected to be driven by “Operation Changhang” to further advance insurance and banking insurance. The NBV growth of individual insurances was driven by a combination of new orders and value ratios. Among them, the new insurance benefits benefited from strong demand for insurance savings of 31.1%, and per capita production capacity and income continued to increase. Among them, U manpower monthly FYP per capita reached 83,000 yuan; U-manpower monthly FYC per capita was 14.1% to 9,313 yuan; the value ratio of individual insurance increased markedly, mainly due to the lengthening of the term of major sales products in 24 years and the reduction in traditional insurance pricing interest rates. Banking insurance was affected by the “integration of reporting and banking”, putting pressure on new orders. However, the value ratio is expected to improve markedly. In addition to the rate pressure drop brought about by the “integration of reporting and banking”, companies are also making significant contributions to actively promoting the term payment business. 2) 24Q1 production insurance premiums were 8.6% year-on-year, maintaining steady growth; the underwriting COR was 98.0%, -0.4 pt year over year, exceeding market expectations. It is expected that the impact of increased car travel and increased compensation will be offset by cost rate optimization. Non-car insurance benefits from improved business quality, and health insurance, liability insurance, etc. are expected to decline. 3) Fluctuations in the 24Q1 capital market intensified, and market interest rates continued to decline. The company benefited from actively allocating long-term fixed income assets to achieve a stable level of investment income by actively allocating long-term fixed income assets and continuing to allocate equity assets with undervalued values, high dividends, and good long-term profit prospects. The 24Q1 net return on investment (unannualized) was 0.8%, the same year on year; the total return on investment (annualized) was 1.3%, -0.1 pt year on year.
Cai Qiang proposed to be a non-executive director of the Group, which will facilitate the further improvement of the corporate governance structure. According to the resolution and announcement of the company's board of directors, Mr. Cai Qiang was nominated as a non-executive director candidate for the 10th board of directors of the company. The company added professionals with debt-side experience to the board of directors, which is conducive to further improvement of the corporate governance structure and the deepening implementation of long-term aviation operations.
Catalyst: Changhang's transformation continues to show results to drive NBV growth.
Risk warning: Regulations are stricter; life insurance reforms fall short of expectations, and capital markets fluctuate.