\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 336 New China Life Insurance Company Ltd(601336) )
Event: New China Life Insurance Company Ltd(601336) disclosed the pre reduction announcement. It is estimated that 1q22 will realize the net profit attributable to the parent company of 1.261 billion yuan to 1.892 billion yuan, with a significant year-on-year decrease of 70% – 80%. The announcement shows that the decrease in investment income is mainly due to the impact of the downturn of the capital market under the condition of high base in the same period. The net profit of the parent company fell by 20% year-on-year compared with our previous forecast in 2022.
Key investment points
The net profit attributable to the parent decreased by 75%, corresponding to 1q22 net profit attributable to the parent by 1.576 billion yuan. The profit decline was mainly due to the high floating profit base of investment realized in the same period. 1q22 CSI 300 and gem index fell by 14.5% and 20.0% respectively, while 1q21 fell slightly by 3.1% and 7.0% respectively in the same period, and the company realized floating profit, which made the profit base higher in the same period. 1q21’s annualized total return on investment was 7.9%, with a year-on-year increase of 2.8 PCT. it led the A-share listed industry. After considering other comprehensive floating losses, the total return on investment was 7.0%, with a year-on-year improvement of 2.9 PCT. we calculated that the cash floating profit of available for sale financial assets accounted for 42.4% of the investment income (about 20% of the listed industry). 1q21’s comprehensive return to the parent decreased by 32.9% to 2.087 billion yuan year-on-year, We expect that the parent company’s comprehensive income has little year-on-year fluctuation. In the past three years, the company accounted for about 32.7% of the annual profit in the first quarter, and 42.2% in the same period in 2021. Pay attention to the follow-up signs of capital market stabilization. It is worth noting that the company’s residual margin at the end of 2021 declined compared with the medium term, and the amortization of residual margin slowed down, dragging down the release of performance.
1q22 epidemic spread all over the country, dragging down the pace of recovery of new orders. We expect 1q22 new business value (NBV) to decline by more than 60% year-on-year. Since 2022, the epidemic has spread all over the country. In the same period, due to the switching between the old and new definitions and serious diseases, the new orders and value base are high, and the average NBV of listed insurance companies has decreased by more than 30%. 1q21 in the same period, New China Life Insurance Company Ltd(601336) long term insurance premiums in the first year increased by 10.5% year-on-year (10-year and above premiums increased by 18.7% year-on-year against the trend), with a high base. Since mid March, under the effect of extremely low base and marginal stabilization of team size in the same period, new orders in the industry have shown signs of stabilization and improvement at the bottom in a single month. It is still necessary to observe the sustainability of stabilization and improvement of effective manpower.
Launch the excellent plan and focus on team upgrading. In the second quarter, New China Life Insurance Company Ltd(601336) carried out the “excellent plan” around the six aspects of “talent selection, cultivation, customer allocation, activity management, policy support and scientific and technological empowerment” to help build a strong talent team. In terms of talent selection and cultivation, Xinhua focuses on the young, professional and urbanized people, and will establish a three-year career growth plan for “excellent” new people, and further optimize the cultivation of new people and supervisors through special training activities, exclusive training venues, full-time head teachers and teaching assistants. At the same time, Xinhua will also enlarge the reward coefficient of elite teams and give special support in allowance setting, promotion reward and training investment; Research and develop exclusive products for newcomers, reduce the sales difficulty of newcomers, supplement products from medium and high-end customers, and improve the production capacity of elite teams.
Profit forecast and investment rating: the company’s performance in the first quarter of 2022 was lower than expected, and the investment income was dragged down by the fluctuation of the equity market. We lowered the profit forecast and estimated that the net profit attributable to the parent company from 2022 to 2024 would be RMB 11.9 billion, RMB 17.9 billion and RMB 19.9 billion respectively (the original forecast was RMB 15.6 billion, RMB 17.9 billion and RMB 20.1 billion), with a year-on-year growth rate of – 20.4%, 50.0% and 6.3%; As of April 22, 2022, the company’s share price corresponds to pev0.5% from 2022 to 202440, 0.36 and 0.33 times, taking into account the valuation price ratio, continue to maintain the “buy” rating.
Risk tip: the equity market fluctuates sharply, and the sales of health insurance remain depressed.
