中国财险(2328HK)三季度经营点评_JPMorgan

▲Price:HK$11.28PriceTarget:HK$12.50Previous:HK$11.50ChinaInsuranceBaoLingChanAC(852)[e-mail](852)[e-mail](AsiaPacific)LimitedYTD1m3m12mAbs3.2%24.1%-17.8%1.6%Rel17.7%15.5%-5.1%16.6%PICCPropertyandCasualty(Reuters:2328.HK,Bloomberg:2328HK)Rmbinmn,year-endDecFY09AFY10AFY11EFY12EFY13ENetProfit(Rmbmn)1,783.05,212.08,394.48,079.48,403.4EPS(Rmb)0.160.470.750.730.75EPSgrowth(%)1532.6%192.4%61.1%-3.8%4.0%BVPS(Rmb)1.952.392.673.303.90DPS(Rmb)0.000.000.230.100.15P/E(x)57.619.712.212.712.2P/BV(x)4.73.93.42.82.4DividendYield0.0%0.0%2.4%1.1%1.6%ROE8.6%21.6%29.8%24.3%20.9%Source:Companydata,Bloomberg,J.P.Morganestimates.CompanyDataSharesO/S(mn)3,456Marketcap(Rmbmn)31,841Marketcap($mn)5,019Price(HK$)11.28DateOfPrice04Nov11Freefloat(%)31.0%3mthAvgdailyvolume30.953M-AveragedailyValue(HK$mn)346.38Average3mDailyTurnover($mn)44.59HSI19,243ExchangeRate7.77FiscalYearEndDecSeepage9foranalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.79111315HK$Oct-10Jan-11Apr-11Jul-11Oct-11PricePerformance2328.HKshareprice(HK$)HSI(rebased)OurrecentcompanyvisittoPICCsuggestsintactunderwritingperformancefor2H11andtheon-goingreservestrengtheningshouldhelptomitigatetheinevitableriseincombinedratioin2012.Weakcapitalizationremainsthestickyissueespeciallyunderthenewregulationsonsub-debtissuance.Were-iterateNeutralwithDec-12PTofHK$12.50.Combinedratioremainsintactfor2H11:Theabsenceofmajornaturaldisastersshouldhelplossratio/combinedratiotostaylowin2H11.Furtherimprovementappearslesslikelyin2012asmandatoryautooperationcontinuestoworsenintheabsenceofpremiumratehike.Theoutlookfor2013wouldhingeonproposedimplementationofpricingliberalizationonvoluntaryautooperation.Adverseimpactfromnewregulationsonsub-debtissuance:Weseelimitedroomtoissuesub-debtsastheamountoutstandingstandsat72%of2010shareholders’funds,i.e.exceededthenewlimitof50%.ShouldPICCberequiredtofollowthenewregulationswhichcapsub-debtsto50%ofnetassetvalueforsolvencymarginratiodetermination,weestimateitslastreportedratioof159%woulddeclineto122%(afterfactoringthe1H11dividendoutflow).Slowlylosingappealasinvestorsre-focusonlifeinsurers:PICChasoutperformedsubstantiallywithflatsharepriceperformanceytdvs.the19-29%declineexperiencedbythelifeinsurersgivenweakbancassurancesales.Therevivalofinsurancesalesasmonetaryeasingtakesplaceshouldre-directinvestors’focusbacktothelifeinsurers.ReiterateNeutralwithDec-12PTofHK$12.50:Ourrolled-forwardPTisup9%fromHK$11.50.WeraiseourFY11Eearningsby7%toreflecttheabsenceofmajornaturaldisastersin2H11E.UpsideriskstoourNeutralratingincludebenigncompetitionsupportingROEexpansionandstrongA-sharemarketperformancewhiledownsiderisksincludefurthertougheningofcapitalrequirementandrapiddeteriorationinautounderwriting.2AsiaPacificEquityResearch06November2011BaoLingChan(852)[e-mail]&LsensitivitymetricsUnderwritingprofitEPSFY12EimpactimpactPICCwasthefirstdomesticfinancialenterprisetolistoverseasin2003.ThecompanyiscurrentlylistedinHongKongonly.PICCprovidesafullrangeofnon-lifeinsuranceservicesinChina.Itisthebiggestplayerinthenon-lifeinsurancesectorwithapremiummarketshareof38%in2010.Thecompanyis69%-ownedbyPICCGroupand9.9%-ownedbyAIGdirectly.Netearnedpremiumgrowthassumption(8.5%)Impactofeachpercentagepointincrease0.9%0.3%Retentionratioassumption(82.9%)Impactofeachpercentagepointincrease0.6%1.2%Investmentyieldassumption(4.1%)Impactofeach50bpsincrease-10%Lossratio/expenseratioassumption(67.6%/30%)Impactofeachpercentagepointdecrease41%14%Source:J.P.Morganestimates.PricetargetandvaluationanalysisOurpricetargetisbasedonaP/BVmethodologyandweassignPICCapricetargetofHK$12.50,basedonatarget3.1xP/BV.OurtargetP/BVmultipleisderivedbyrelatinganormalizedROE(calculatedbasedonan‘over-the-cycle’underwritingandinvestmentperformance)toarequiredreturnwithgrowthcredited.Keyparametersareasfollow:Turnoverbreakdown,FY10HK$Adjustedbookvalue4.08P/BVmultiple3.1xSharepriceequivalent12.66Keyassumptions:Costofequity11.8%Returnonequity24.9%Growth5.5%Combinedratio97.3%Source:PICC.Investmentyield4.0%Effectivetaxrate25.0%EPS:J.P.MorganvsconsensusSource:J.P.Morganestimates.RmbJ.P.MorganConsensusFY11E0.750.78OurcurrentPT(Dec-12)impliesaP/Eof14x(FY12E).UpsideriskstoourPTarestrongA-sharemarketperformance,benigncompetitionandrobustpremiumgrowthwhiledownsiderisksareweakcapitalpositioncappinggrowthandrapiddeteriorationinautounderwriting.FY12E0.730.90FY13E0.751.03Source:Bloomberg,J.P.Morganestimates.PeervaluationcomparisonB'bergPricePTP/EP/BVP/EVIm