Maintaining the “increase in holdings” rating, the target price was raised to HK$13.35 per share, corresponding to the 2024 P/B of 1.2 times: the company achieved net profit of RMB 24.566 billion in 2023, -15.6% year on year; of these, underwritten profit was RMB 10.189 billion, -29.1% year over year, comprehensive cost ratio of 97.8%, +1.2pt year over year, due to increased automobile travel, major disasters such as hurricanes and storms, etc., in line with market expectations; total investment income of RMB 20.807 billion, compared to -1.6%, total The return on investment was 3.5%, -0.3 pt year over year, mainly affected by changes in the fair value of equity assets and the decline in profit and loss due to capital market fluctuations. The dividend in '23 was RMB 0.489 per share, compared to 2.3%. The dividend rate increased to 44.3% from 39.9% in '22. Maintaining stable shareholder returns by increasing the dividend rate against the backdrop of profit pressure demonstrated management's confidence in the long-term development of the company and the importance attached to shareholder returns, which exceeded market expectations. Considering that there is still room for improvement in underwriting profits in 2014 and a low investment base, the 2024-2026 EPS was increased to 1.35 (1.24, 8.5%) /1.50 (1.37, 9.6%) /1.67 yuan. We are optimistic that the improved profit will lead to an increase in shareholder returns, and the target price was raised to HK$13.35 per share.
The steady increase in car insurance, the impact of one-time factors such as travel recovery and major disasters led to a rise in COR:
Thanks to the steady growth in car ownership, the premium income of the original car insurance in '23 was +5.3% compared to the same period last year.
The comprehensive cost rate for car insurance in '23 was 96.9%, +2.4 pt compared to the year, mainly due to the increase in the insurance rate due to increased car travel and the 2.1 pt increase in the comprehensive compensation rate due to major disasters, etc.
Non-vehicle performance is divided, and there is still room for optimization in liability insurance and corporate financial insurance: the original premium income of non-car insurance was +7.4% year-on-year. Among them, eHealth Insurance and Agricultural Insurance were the main growth drivers, with premium growth rates of 3.6% and 11.9%, respectively. The profit performance of major non-auto insurance types was divided in '23. Among them, agricultural insurance's compensation rate increased by 2.2 points under the impact of the disaster, but thanks to cost control, it still achieved a comprehensive cost rate of 95.8%, an increase of 1.4 points over the previous year; eHealth Insurance benefited from strict cost costs and claim risk control, which led to a 4.6pt reduction in the comprehensive cost ratio to 97.7% year on year; while liability insurance and corporate financial insurance still faced losses throughout the year. The comprehensive cost ratio was 107.0% and 103.8%, respectively. There is also plenty of room for optimization.
Catalyst: Catastrophe reduction.
Risk warning: Increased industry competition; increased risk of cataclysms; capital market fluctuations.