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INSTITUTIONAL EQUITY RESEARCH
Ping An Insurance (Group) Company
of China (2318.HK)
Better-than-expected operating performance
16 March 2015
CHINA | INSURANCE | COMPANY REPORT
Buy (Maintain)
Summary
•
•
•
•
•
As at the end of 3Q2014, China Pingan`s performance was better than our expectation.
Net profit increased largely by 35.8% y-y to RMB31.687 billion with the EPS of RMB4.00;
according to the lasted data by China Insurance Regulatory Commission (CIRC), as at the
end of Jan 2015, the premiums of the Life and P&C insurance of Ping An increased
largely by 27.98% and 21.99% y-y to RMB47.654 and 18.807 billion respectively;
Total assets increased stably by 14.9% to RMB3.86 trillion compared with the end of
2013, and net assets grew 19.7% to RMB218.678 billion, equivalent to the BVPS of
RMB27.62;
The Group`s business structure continued to be improved under the current strategy of
“Banking + Insurance + Investment”, and meanwhile, it will pay close attention to
develop E-financial business in future and realize one-stop comprehensive service under
mobile platform. Currently, the Group`s business structure covers most of financial
services and is one of the leading comprehensive financial groups in China;
Considering the strong profit growth and stable market environment, we increase China
Pingan`s 12-m TP to HK$105.00, 26% higher than the current price, equivalent to
11.3xP/E and 2.3xP/B in 2015 respectively, the valuation is still reasonable. Maintain
Buy rating.
Strong profit growth
60.00%
60.00%
40.00%
40.00%
20.00%
20.00%
0.00%
-40.00%
Source: Company, Phillip Securities (HK) Research
Page | 1 | PHILLISECURITIES (HK) RESEARCH
Jan-15
Sep-14
Jan-14
May-14
Sep-13
Jan-13
May-13
Sep-12
Jan-12
May-12
Sep-11
Jan-11
May-11
Sep-10
Jan-10
May-10
Sep-09
Jan-09
May-09
Sep-08
Jan-08
-20.00%
May-08
0.00%
-20.00%
-40.00%
-60.00%
1MTH
-2.62
-3.65
China Pingan
HSI
3MTH
15.38
3.45
1YR
38.38
10.60
PRICE & HSI
110.00
100.00
90.00
80.00
70.00
60.00
50.00
40.00
30.00
120
100
80
60
40
20
Volume, mn
2318 hk equity
13-Mar-15
80.00%
80.00%
PRICE PERFORMANCE, %
13-Jan -15
100.00%
Monthly rate of P&C Insurance (Right)
6.08
4.98
3.11
13-Nov-14
Monthly rate of Life Insurance (Right)
100.00%
Shenzhen Investment Holdings:
All Gain Trading
Business Fortune Holdings
13-Sep -14
Commulative rate of P&C Insurance (Left)
3,724
310,954
88.70/ 55.60
SHARE HOLDING PATTERN, %
13-Jul-14
Mon th ly g rowth rate
yo y
Commulative rate of Life Insurance (Left)
O/S SHARES (MN) :
MARKET CAP (HK$ MN) :
52 - WK HI/LO (HK$) :
13-May-14
Co mmulative
g ro wth rate yo y
COMPANY DATA
13-Mar-14
China Ping An`s stable profit growth is mainly benefited from the strong increase of
premiums. As at the end of Jan 2015, the premiums of the Life and P&C insurance of Ping An
increased largely by 27.98% and 21.99% y-y to RMB47.654 and 18.807 billion respectively.
Meanwhile, due to the development of the market, China Pingan`s other businesses also
increased sharply. By the end of Sep last year, total amount of the Group`s investment
portfolio reached to RMB1.37 trillion, up 11.2% compared with the end of 2013. Net interest
incomes increased by 10.68% to RMB 46.307 billion, and we expect it will go up obviously in
2014.
Additionally, the Group`s banking business developed significantly, in 3Q2014, net interest
incomes of the banking business grew largely 30.2% to RMB88.097 billion, around 22.5% of
the Group`s total incomes. According to the latest data, Pingan Bank`s net profit increased
by 30% y-y- approximately to RMB19.8 billion, higher than our estimation, therefore we
expect its profit contribution to the Group will increase largely, and we will discuss it in
detail after the announcement of annual results.
The premium growth China Ping An`s Life and P&C insurance
CMP HK83.50
TARGET HK$105.00 (+26%)
0
HSI
Source: Phillip Securities (HK) Research
KEY FINANCIALS
Key Financial Summary
FYE
12/12 12/13 12/14F 12/15F
Net earned premiums (RMB mn)
213,144 240,199 289,292 342,363
Net Profit, adj. (RMB mn)
20,050 28,154 40,396 54,900
EPS, adj. (RMB)
2.53
3.56
5.10
6.94
P/E (X)
26.6
18.9
13.2
9.7
BVPS (RMB)
20.16 23.08 30.01 37.51
P/B (X)
3.3
2.9
2.2
1.8
DPS (RMB)
0.45
0.53
0.77
1.04
Div. Yield
0.7% 0.8%
1.1% 1.5%
Source: Bloomberg, PSR est.
*All multiples & yields based on current market price
Source: Company reports, Phillip Securities Est.
Research Analyst
Xingyu CHEN (+ 86 21 51699400-105)
[email protected]
China Pingan（
（2318 HK）
） COMPANY REPORT
Overall, Ping An`s operating performance is better than our expectations benefited
from the strong growth of premiums and other businesses. We maintain the profit
forecast, and expect the Group`s net profit would achieve to RMB40.4 billion with the
EPS of RMB5.10 in 2014.
In addition, we still hold the optimistic view on the development of the sector, the
insurers` premiums would increase stably and investment gains will also increase
obviously in 2015. Therefore, we increase China Pingan`s 12-m TP to HK$105.00, 26%
higher than the current price, equivalent to 11.3xP/E and 2.3xP/B in 2015
respectively, the valuation is still reasonable. Maintain Buy rating.
The growth of China Ping An`s investment income
Growth rate y-y
Net investment income
200.00%
150.00%
100.00%
50.00%
0.00%
-50.00%
-100.00%
Source: Company, Phillip Securities (HK) Research
Asset growth of China Ping An
Assets (RMB Million)
4,500,000
Total assets
Net assets
Growth of TA (Right)
Growth of NA (Right)
Growth rate y-y
160.00%
140.00%
4,000,000
120.00%
3,500,000
100.00%
3,000,000
80.00%
2,500,000
60.00%
2,000,000
40.00%
20.00%
1,500,000
0.00%
1,000,000
-20.00%
500,000
-40.00%
0
-60.00%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3Q2014
Source: Company, Phillip Securities (HK) Research
Risk
Lower-than-expected growth of incomes;
Share price decreases largely affected by the market environment in the short term.
Page | 2 | PHILLISECURITIES (HK) RESEARCH
China Pingan（
（2318 HK）
） COMPANY REPORT
FINANCIALS
FYE
FY11
FY12
FY13
Valuation Ratios
P/E (X)
26.9
26.6
18.9
P/B (X)
4.1
3.3
2.9
P/EV (X)
2.3
1.9
1.6
Dividend Payout ratio
16.26%
17.77% 15.00%
Dividend Yield
0.61%
0.67%
0.79%
Per share data (RMB)
EPS, reported
2.50
2.53
3.56
EPS, adj.
2.50
2.53
3.56
DPS
0.41
0.45
0.53
BVPS
16.53
20.16
23.08
EVPS
29.77
36.11
41.64
Grow th
Net earned premiums
32.3%
14.2%
12.7%
Total income
39.0%
24.6%
24.2%
Profit before tax
34.4%
7.7%
42.9%
Net Income, adj.
12.5%
3.0%
40.4%
Key Ratios
Net profit / Gross premiums
9.37%
8.57% 10.46%
Net profit / Net earned premiums
10.43%
9.41% 11.72%
Incom e Statem ent (RMB m n)
FY11
FY12
FY13F
Gross w ritten premiums and policy fees
207,802 233,940 269,051
Less: Premiums ceded to reinsurers
(10,970) (12,851) (21,034)
Net w ritten premiums and policy fees
196,832 221,089 248,017
Increase in unearned premium reserves, net
(10,170)
(7,945)
(7,818)
Net earned prem ium s
186,662 213,144 240,199
Reinsurance commission income
3,656
4,529
6,584
Interest income of banking operations
39,314
74,852
93,291
Fees and commission imcome of non-insurance operations
8,614
10,891
15,815
Net investment income
29,265
27,378
55,583
Share of profits and losses of associates and jointly
1,068
controlled entities
(46)
(264)
Other income
3,665
8,445
10,013
Total incom e
272,244 339,193 421,221
Claims and policyholders' benefits
(145,764) (165,994) (198,002)
Commission expenses of insurance operations (17,767) (20,437) (25,390)
Genral and administrative expenses
(50,575) (68,477) (81,753)
Interest exoenses of banking operations
(20,432) (40,351) (50,861)
Fees and commission expenses of non-insurance (1,050)
operations (1,455)
(1,979)
Loan loss provision, net of reversals
(1,704)
(3,048)
(6,709)
Foreign exchange losses
(434)
255
(381)
Finance costs
(1,254)
(1,758)
(3,202)
Other expenses
(3,238)
(5,590)
(6,720)
Total expense
(242,218) (306,855) (374,997)
Profit before tax
30,026
32,338
46,224
Income tax
(7,444)
(5,588) (10,210)
Income tax rate
32.96%
20.89% 22.09%
Profit for the year
22,582
26,750
36,014
Minority interest
(3,107)
(6,700)
(7,860)
Net profit
19,475
20,050
28,154
Dividend
3,166
3,562
4,223
Source: Company, Phillip Securities (HK) Research Estimates
Page | 3 | PHILLISECURITIES (HK) RESEARCH
FY14F
FY15F
13.2
2.2
1.4
15.00%
1.14%
9.7
1.8
1.3
15.00%
1.55%
5.10
5.10
0.77
30.01
46.64
6.94
6.94
1.04
37.51
51.31
20.4%
23.4%
35.7%
43.5%
18.3%
23.6%
32.2%
35.9%
12.31%
13.94%
13.96%
16.04%
FY14F
FY15F
328,242
393,891
(28,396)
(38,334)
299,846
355,556
(10,554)
(13,193)
289,292
342,363
9,020
11,726
119,412
155,236
22,141
29,890
66,700
86,709
0
0
13,017
16,271
519,582
642,197
(249,483) (311,853)
(33,515)
(43,569)
(89,928) (103,418)
(58,490)
(66,094)
(2,573)
(3,087)
(7,917)
(11,083)
(438)
(504)
(5,443)
(7,893)
(9,072)
(11,794)
(456,859) (559,295)
62,723
82,902
(13,681)
(18,059)
21.81%
21.78%
49,042
64,842
(8,646)
(9,943)
40,396
54,900
6,059
8,235
China Pingan（
（2318 HK）
） COMPANY REPORT
Ratings History
Market Price
Target Price
Source: Bloomberg, PSR
Dec-15
Sep-15
Jun-15
Dec-14
Mar-15
Sep-14
Jun-14
Dec-13
Mar-14
Sep-13
Jun-13
Dec-12
Mar-13
Sep-12
Mar-12
Dec-11
Jun-12
120
110
100
90
80
70
60
50
40
30
1
2
3
4
5
PSR Rating System
Total Returns
Recom m endation Rating
> +20%
Buy
1
+5% to +20%
Accumulate
2
-5% to +5%
Neutral
3
-5% to -20%
Reduce
4
<-20%
Sell
5
Rem arks
We do not base our recommendations entirely on the above quantitative return bands.
We consider qualitative factors like (but not limited to) a stock's risk rew ard profile, market
sentiment, recent rate of share price appreciation, presence or absence of stock price
catalysts, and speculative undertones surrounding the stock, before making our final
recommendation
Page | 4 | PHILLISECURITIES (HK) RESEARCH
China Pingan（
（2318 HK）
） COMPANY REPORT
PHILLIP RESEARCH STOCK SELECTION SYSTEMS
Total Return
>+20%
+5% to +20%
-5% to +5%
-5% to -20%
<-20%
Recommendation
Buy
Accumulate
Neutral
Reduce
Sell
Rating
1
2
3
4
5
Remarks
>20% upside from the current price
+5% to +20%upside from the current price
Trade within ± 5% from the current price
-5% to -20% downside from the current price
>20%downside from the current price
We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a
stock`s risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative
undertones surrounding the stock, before making our final recommendation
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Analyst Disclosure: Neither the analyst(s) preparing this report nor his associate has any financial interest in or serves as an officer of the listed corporation covered in
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Contact Information (Regional Member Companies)
PHILLIP SECURITIES (HK) RESEARCH | 5 | P a g e
China Pingan（
（2318 HK）
） COMPANY REPORT
SINGAPORE
Phillip Securities Pte Ltd
Raffles City Tower
250, North Bridge Road #06-00
Singapore 179101
Tel : (65) 6533 6001
Fax : (65) 6535 6631
Website: www.poems.com.sg
MALAYSIA
Phillip Capital Management Sdn Bhd
B-3-6 Block B Level 3 Megan Avenue II,
No. 12, Jalan Yap Kwan Seng, 50450
Kuala Lumpur
Tel (603) 21628841
Fax (603) 21665099
Website: www.poems.com.my
HONG KONG
Phillip Securities (HK) Ltd
Exchange Participant of the Stock Exchange of Hong Kong
11/F United Centre 95 Queensway
Hong Kong
Tel (852) 22776600
Fax (852) 28685307
Websites: www.phillip.com.hk
JAPAN
PhillipCapital Japan K.K.
Nagata-cho Bldg.,
8F, 2-4-3 Nagata-cho,
Chiyoda-ku, Tokyo 100-0014
Tel (81-3) 35953631
Fax (81-3) 35953630
Website:www.phillip.co.jp
INDONESIA
PT Phillip Securities Indonesia
ANZ Tower Level 23B,
Jl Jend Sudirman Kav 33A
Jakarta 10220 – Indonesia
Tel (62-21) 57900800
Fax (62-21) 57900809
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CHINA
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15th Floor, Vorawat Building,
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Bangkok 10500 Thailand
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Fax (66-2) 22680921
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FRANCE
King & Shaxson Capital Limited
3rd Floor, 35 Rue de la Bienfaisance 75008
Paris France
Tel (33-1) 45633100
Fax (33-1) 45636017
Website: www.kingandshaxson.com
UNITED KINGDOM
King & Shaxson Capital Limited
6th Floor, Candlewick House,
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London, EC4N 6AS
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Level 12, 15 William Street,
Melbourne, Victoria 3000, Australia
Tel (613) 96188238
Fax (613) 92002272
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PHILLIP SECURITIES (HK) RESEARCH | 6 | P a g e