Kaiyuan Securities: Give cPIC a buy rating

2021-10-30Kaiyuan Securities Co., Ltd. Gao Chao, Lv Chenyu conducted a study on China Pacific Insurance Company and released a research report "China Pacific Insurance 2021 3 Quarter Report Comments: The growth rate of new orders is slightly lower than expected, and the transformation of agents is expected to lead", this report gives a buy rating to China Pacific Insurance Company, and the current stock price is 27.4 yuan.

CPIC (601601)

The growth rate of new orders is slightly lower than expected, and the transformation of agents is expected to lead, maintaining a "buy" rating

The company disclosed the 3rd quarter report of 2021, achieving a net profit attributable to the mother of 22.7 billion yuan in the first three quarters of 2021, a year-on-year increase of +15.5%; in the first three quarters of 2021, the new policy premium of CPIC Life Insurance was 26.3 billion yuan, +3.6% year-on-year, which was slower than that of the first half of 2021; the auto insurance premium was 66.5 billion yuan, a year-on-year -8.0%, and the non-auto insurance was 52.5 billion yuan, +21.4% year-on-year, both of which slowed down the growth rate compared with the first half of 2021; life insurance and property insurance premium income were lower than expected. The annualized total investment yield for the first three quarters of 2021 was 5.5%, down 0.2pct year-on-year, and the annualized net investment return was 4.3%, down 0.3pct year-on-year. As new policy premiums are lower than we expected, we expect NBV to be lowered for 2021-2023 to -15.6%/+18.2%/+15.7% (forward -5.4%/+20.0%/+19.0%), corresponding to EV of +10.1%/+10.3%/+10.3% year-on-year, and net profit attributable to the parent to 324/402/444 billion yuan (326/407/453 million yuan), corresponding to EPS of 3.4/4.3/4.7 yuan. The company is the leader in the insurance industry, the "long-distance flight plan" is fully deepened, the management continues to promote the transformation and upgrading of the life insurance agent team, it is expected that the transformation of the agent is leading the industry, the valuation is expected to be repaired, and the current stock price corresponds to 0.5/0.5/0.4 times of the PEV in 2021-2023, maintaining the "buy" rating.

The acceleration of transformation has brought pain, new policy premiums have been under pressure, and the follow-up core focus has been on high-performing manpower

In the first three quarters of 2021, the new policy premiums of CPIC Life Insurance were 26.3 billion yuan, +3.6% year-on-year (+18.5% in the first half of 2021), the new policy premiums in the third quarter of 2021 were 3.7 billion yuan, -41.2% year-on-year, and the new policies paid in advance were 2.9 billion yuan, a year-on-year -39.8%, mainly due to the mismatch between supply and demand in the industry and the company's initiative to accelerate the transformation of the pain, NBV may be dragged down by the decline in new policy premiums year-on-year. The company's transformation strategy is clear, the path is clear, the measures are symptomatic, the new Basic Law and the upgrade of the four major support systems are expected to further accelerate the transformation of the team's "three modernizations" - professionalization, specialization and digitalization, and will upgrade the working environment of marketers to adapt to the "three modernizations" and guide the team into a virtuous circle. At the same time, the core high-performing manpower with high production capacity, sustainability and strong insurance quality will be the focus of attention, and the manpower scale indicators may be diluted.

Property insurance premiums are better than those of listed counterparts year-on-year, the growth rate has slowed down, and the premium suppression of the comprehensive reform of automobile insurance is expected to be lifted

In the first three quarters of 2021, property insurance premiums were 119 billion yuan, +3.0% (2021H1 +6.4%), the growth rate was leading the listed industry, auto insurance was 66.5 billion yuan, -8.0% (2021H1 -6.9%), non-auto insurance was 52.5 billion yuan, +21.4% (2021H1 +28.6%), and the proportion of non-auto insurance decreased by 1.2pct to 44.1% month-on-month. The company actively responds to the comprehensive reform of automobile insurance, explores a new model of automobile insurance operation, and serves the national strategy of non-automobile insurance business, improves risk management capabilities, optimizes product structure, and is expected to realize two-wheel drive of automobile and non-vehicle. The year-on-year suppression of premiums by the comprehensive reform of motor insurance is expected to be lifted, and we expect property insurance premiums to be +4.6%/+11.8%/+13.6% year-on-year from 2021 to 2023, and the market position will continue to improve.

Risk Warning: Long-end interest rates fell more than expected; the size of the agent team fell more than expected

A total of 21 institutions have given ratings in the last 90 days, 16 buy ratings and 5 overweight ratings; the average target price of institutions in the past 90 days has been 40.8; the Securities Star Valuation Analysis Tool shows that China Pacific Insurance (601601) good companies have rated 3 stars, good price ratings of 4 stars, and valuation comprehensive ratings of 3.5 stars.