15/05/2020

China Life Insurance (601628): Value Analysis (2): Three Years Vision

In the previous report, we analyzed in depth the changes and efforts made by China Life from the perspective of strategic thinking and integration. This report, based on China Life’s current transformation and changes, expects how the company’s future end will be interpreted, how assets will improve, and how it will be valued.Consistently higher than peers.

How will the debt end be interpreted in the future?

In 2019, the company closed earlier. Under the background that the listed peers are subject to varying degrees of pressure, China Life has continued to deliver quarterly reports that exceed market expectations. We expect new premiums (0%) and overall scale (15%).The growth rate of new business value (18%) is expected to sweep across the industry, and it is also being peered with in 2017 during the peak period.

China Life’s future debt end will continue to improve: (1) Short-term: Advance sales are ahead of schedule, product competition is expanding, external environment changes, two-digit growth in manpower scale, and corporate organizational structure adjustment to improve efficiency and other factors are intertwined. New orders that will be popular in 2020Both premiums and value can achieve growth of around 20% (significantly higher than 0% -10% growth in growth markets) against a high base.

The opening red is expected to be red. Under the pessimistic assumption, the preliminary new orders in 2020 are expected to achieve positive growth, and the structure will also improve.

(2) Medium-term: the current strategy has been verified by the industry and is in line with the future implementation of international accounting standards, and taking into account the progressive radical internal consequences of the company, no hidden dangers, and the overall stability and high quality of the company is the long-term stable development of the companyThe foundation and the impact of the reform of the system and mechanism are far-reaching. Therefore, we believe that China Life will continue to continue its value and strength in the medium and long term, surpassing its peers.

The asset side continued to improve.

At present, the company starts the reform of asset-side marketization from top to bottom. By establishing a market-oriented and professional investment system, it promotes the improvement of the “comfort” of asset management teams in the past, which enhances the company’s investment capabilities and significantly improves the company’s weakness.

The company improves the efficiency of the asset management team by establishing a top-down asset allocation management system, while adjusting personnel management methods, directly linking performance bonuses to goals, and adopting the survival of the fittest.

According to the company’s current market-oriented reform measures on the asset side, we expect the company’s asset allocation structure will continue to be optimized, and future returns will help maintain stability.

The rapid growth of new business value far exceeds that of its peers, and the embedded value has grown steadily.

The optimization of business structure promotes the increase of the value rate, which is the core driving force for the company’s future value growth. The three-year compound growth rate of NBV is much faster than that of the industry.

The company continues to strengthen the evaluation standards for guaranteed products. The future value rate will increase the highest in the industry. We expect the company’s NBV profit margins to be 33%, 38%, and 41 in 2019-2021.

5%, the growth rate of new orders included above is 1%, 5%, and 5% respectively. It is calculated that the company’s new business value growth rate in 2019-2021 will be 18%, 20%, 15%, and three years.The compound value-added rate is 18%, which will far exceed the level of listed peers. Under the background of the industry pressure, it can still achieve large double-digit growth rates. It is a highly sparse company in the industry. It changed the past trend and caught up.

The rapid growth of new business value and the stability of the investment end, the company’s embedded value growth rate is trying to maintain stability. It is predicted that the company’s embedded value growth hub in 2019-2021 will be 17%.

Investment suggestion: Maintain the company’s “Highly Recommended-A” rating. In the first value analysis report, we deeply decomposed the qualitative changes that currently occur in China Life. In the second article, we analyzed in depth how the future China Life ‘s resistance will be interpreted and how the asset side will be improved.How can the value side surpass its peers and solve the current continuity of investors’ changes in China Life and the sustainability of performance growth?

(1) The sales rhythm, product competitiveness, agent size, and organizational reform of the company are intertwined. The company’s start in 2020 will maintain a high growth trend at a high base in 2019. It is expected that the growth rate in the new single period can reach 20%(2) Gradually realize the new single scale and achieve positive growth. Considering that the company continues to strengthen the sales of guaranteed products, and starts to sell products such as China Life Insurance in the pre-sale stage, the new single premium scale and structure will continue to improve in 2020.
(3) In the medium term, the current strategy has been verified by the industry and is in line with the future implementation of international accounting standards. Taking into account the company’s current radical and disregarding consequences, the stability and high quality of the team are the foundation for the company’s long-term stable development.Moreover, the impact of the reform of the system and mechanism is far-reaching. Therefore, we believe that China Life will continue to continue its value and strength in the medium and long term, instead of just merging internally at present, the company is expected to continue to surpass its peers; (4) asset sideThe reform of the institutional mechanism is not only a change in the management process, but also due to the stricter management and evaluation of personnel, and the allocation of long-term bonds and high-dividend equity assets to the allocation structure will gradually stabilize the return on investment in the future;New orders are increasing and the value rate continues to increase. The average growth rate of NBV in 2019-2021 is 18%, far exceeding that of the industry; while the rapid growth of new business value and the stability of investment returns will promote the embedded value to remain 17%.Around the steady growth.

In summary, we have listed China Life as the top bidder, and the current company overcomes the corresponding 2020 revenue of 0.

86X, considering that the company’s transformation speed and performance growth exceed that of its peers, and the prosperity of the insurance industry has significantly improved, the company’s target price-earnings ratio in 2020 is estimated1.

1X, target price of 43 yuan, 28% space.

Risk reminder: The company’s gradual transformation exceeds expectations, the transformation intensity exceeds expectations, and the increase in the value rate 南京夜网 is less than expected; in the 2020, the debt end of the industry will intensify, and then the new orders will grow weak and the manpower will increase.The market has dropped significantly