【行业研究报告】中国平安-Resilient DPS despite OPAT decline; EV assumptions change cut VNB more than expected

PingAnreportedFY23results,withtheL&HEVeconomicassumptionscutby
50bpsonlong-terminvestmentreturnfrom5.0%to4.5%,and150bpsonrisk
discountrate(RDR)from11%to9.5%.Bothwereforthesakeofprudencein
viewofprolongedlowinterestrateandmacrouncertainties.Theadjustments
wereexpectedastheinsurerhasrecordedatnegativeinvestmentvariances
since2018whichadverselyaffectedthegrowthofEV.YettheimpactstoVNB
andL&HEVoutpacedmarketexpectations.Fourpointstohighlight:1)Group
OPAT-19.7%toRMB118.0bn,draggedbyanetlossofRMB20.7bnfromasset
management;2)L&HVNBamountedtoRMB39.3bn,+36.2%YoY,ifsubjectto
end-2022assumptionsonalike-for-likebasis,indicatingresilientgrowthdriven
bystableVNBmargin(-0.5pctfrom24.1%to23.7%);3)economicassumptions
changeloweredL&HVNBbyc.21%toRMB31.1bn(+7.8%YoY)andL&HEV
byc.11%toRMB831.0bn(-5.0%YoY)vsRMB930.2bn(+6.4%YoY)onalike-
for-likebasis;4)theGroupsustainedDPSgrowthtoRMB2.43pershare,implying
37.3%payoutonshareholders’OPAT,despiteOPATdecline.Concerning
investmentvolatilitiesandhighbasesince2Q23,welowerFY24-26EEPSto
RMB6.94/RMB7.87/RMB8.62andrevaluetheGroupbasedonSOTP(Fig.4)to
reflectunderperformedAssetmanagement(AM)andTechnology.WeadjustL&H
EVwithnewsensitivityassumption.MaintainBUY,withnewTPatHK$52.0.
OPATmissed,draggedbyRMB20.7bnlossinAM.TheGroup’sOPATslid
by19.7%YoYduetoanetlossofRMB20.7bninassetmanagement,vsRMB
by19.7%YoYduetoanetlossofRMB20.7bninassetmanagement,vsRMB
2.3bnprofitsin2022.Therestatedquarterlydecreaseenlargedundernew
assumptionsat-6.8%/-10.1%/-24.7%/-54.5%in1Q/2Q/3Q/4Q23,reflecting
tightenedregulatoryoversightin2H23.TheGroup’sNPATslumpedby22.8%
toRMB85.7bn(vs9M23:-5.6%)withthe4QprintturnedtoanetlossofRMB
1.9bn(vs2022:RMB18.2bn).Risingcreditrisksamidmarketvolatilities
triggeringsomeassetsrevaluationcausedtheAMprofitabilitypressure.CSM
release(-7.2%YoY)wastuggedbyadecreasingCSMbeg,balance(-6.7%
YoY).Lookingahead,weprojecttheL&HOPATwillbemorerelianton
investmentresults(+17.5%in2023)withthegrowthofinsuranceserviceresult
approachingto0%,asthecontractedCSMbalanceisstilllikelytosustain.
SolidVNBgrowthdrivenbystablemargin.L&HVNB+36.2%YoYto
RMB39.3bnbasedonend-2022assumptionsandmodel,showingresilient
VNBgrowthunderpinnedbystablemargin(-0.5pctfrom24.1%to23.7%).
Therestatedquarterlyprintsevenimpliedasequentiallyimprovedtrendasof
16.3%/19.5%/19.8%/23.1%in1Q/2Q/3Q/4Q23,respectively.Weregardthis
amixtureofmoresavingsproductssoldunderstrongresidentialdemandsand
improvedmargininbancassuranceunderloweredexpenseratein2H23.
AgencyVNB+40.3%YoYtoRMB32.2bnandbancassuranceVNB+77.7%
YoYtoRMB3.6bn,comprising91.2%oftotalL&HVNBbyend-2023.
Effectsofassumptionschg.outpacedexpectation.L&HVNBamountedto
RMB31.1bn(+7.8%YoY),20.8%lowerthanRMB39.3bn(+36.2%YoY)ona
like-for-likebasis.L&HEVfellby11%toRMB831bn(-5.0%YoY)andGroup
EVdeclinedby6.7%toRMB1.39tn(-2.4%YoY),vsRMB1.49tn(+4.6%YoY)
priortotherestatement(Fig.1).Thechangeoneconomicassumptions(-5.4%)
andnegativeinvestmentvariances(-2.0%)jointlyaffectedthegrowthofEV.
Valuation:Thestockisnowtradingat0.45xFY24EP/EV.Weexpectthe
Group’sL&HOPATtobemorereliantoninvestmentserviceresults,andthe
betatradingmomentumshouldbenefitthemarketproxywhensentiment
recovers.MaintainBUYwithnewTPatHK$52.0,implying1.0xFY24EP/EV.