Profile
Previous Close Price
Key Statistics
| Dec RMB mn | 2023 | 2024f | 2025f |
|---|---|---|---|
| PE (X) | |||
| Div Yield (%) | 3 | 3.4 | 3.8 |
| P/BV (X) | 0.6x | 0.6x | 0.5x |
Recent Developments
Our Views
Expect VNB growth of +16%/+11%/+10% y/y in FY24/25/26F. We expect this improvement to be more structural rather than just a one-time occurrence, as the sustained demand for insurance products to prepare for customers’ retirement, VNB margin improvement driven by lower financial costs, and turnaround in commission expenses are all here to stay. We expect China Life to deliver high to low-teen VNB growth in FY24-26F.
Proactive measures to prevent the negative spread risk. In response to the negative spread risk, management indicated 1) COL has been controlled at 2.9%, and average COL would further reduce, as new policies have lower pricing interest rates; 2) the product mix is shifting to more participating and variable-interest products; and 3) it is lengthening the duration on the asset side to match liabilities. Management also indicated the duration gap has further improved from 5.2 years in 2021, to 4-5 years by 1H24.
Lift TP to HKD20, reiterate BUY. Factoring in improved investment gains driven by A-share market re-rating, we revise up our earnings forecast for FY24/25F by 32%/5%, add FY26 numbers and maintain our VNB forecasts. We lift TP to HKD20 from HKD18, based on the same 0.3x FY25F P/EV. We believe improving equity market performance with strong VNB growth warrant China Life to further re-rate. With management indicating its COL of 2.9% is lower than the investment yield and potential equity investment gains, investors’ concerns over the negative spread risk should also alleviate.
Risks
Valuation
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