Category: Money tips Release Date: 2006-12-30
Investment Points
The company's current stock price performance in line with our pre-judgment of the company A shares listed on the first day we set prices in a price cap, January 15 after the daily limit price has already broken our previous holdings given interval into the overweight range carefully. This is our home market and reasonable risk discount rate of 9.5% ~ 10.5%, investment rate of return by 0.5% ~ 1%, new business multiplier of 35 ~ 40 times the assumptions to calculate the assessed value of a share in 2007 35.11 ~ 39.41 yuan on the basis of the corresponding investment advice is given.
The scarcity of insurance stocks are expected to promote the stock rose to 50 yuan more than the price range is still a rational range, the corresponding assumption is that the risk discount rate of 9.5% on the investment yield curve parallel shift of 100 bp, or 8.5% risk discount rate under the Move 50 bp. If the discount rate at 8.5% of the risk-based investment yield will be 100 bp while shifting upward for more than appraised value in 2007 will reach 65 to 70 yuan, we think this is a more optimistic scenario in the market might reach the target price range , we do not rule out the possibility of such a situation.
A share premium relative to the H shares will be long-standing, narrow the premium rose from the H shares rather than A shares fell We believe that the local investors and foreign investors in China Life is the result of cognitive bias will occur between the two places share a long-term deviation from the main reason, two investor risk appetite and the company's future investment income to determine differences in the rate of an upward trend in the two valuation basis, leading to inconsistencies and to assess differences in value judgments. We are more inclined to believe that, with the assets of overseas investors in China increased the level of awareness and understanding of the uniqueness of China Life, H shares will gradually move closer to the A shares.
"Two different" decision to the valuation of China Life Insurance premiums will be maintained for a long period of time, the local life insurance companies to growth than domestic commercial banks to a higher life insurance companies than the value of assets of commercial banks more transparent, risk management system is easier to market-oriented China's life insurance market life insurance market than in Europe and the United States was younger, these are the decisions of the China Life Insurance may enjoy a higher valuation factors, and in the short term will not disappear.
A share price is expected to enter the range of 50 to 53 yuan a rational We are still quoted on the period "to share half of the life insurance sector growth (January 5, 2007) and relevant data, a reasonable assessment of the value of the company's scope of certain adjustments.
"Considering the long-term government bonds are risk-free interest rate of 3%, equity risk premium of 5% to 6% or so, β coefficient 1.14 times the corresponding RDR at between 8.7% ~ 9.84%, the range of local and international life insurance companies RDR assumed flat, "Under this assumption, we believe that company's share price will be able to reach 50 to 53 yuan range, not out of optimism, driven by share price at the move to 65 ~ 70 yuan.
The risk of future changes in interest rates prompted, capital market volatility, changes in regulatory policy will affect the company's future performance and weaken their competitive position, other financial sub-sectors of the development will divert resources of the company's customers and adversely affect the company's business expansion.
H shares of the risk discount rate applied by investors of 11.5%, investment rate of return assumption has not produced much change, which led to foreign investors recognized the value of China Life shares than the A main reason for the low investor. We believe that this cognitive bias will gradually be corrected, H shares A share price direction will be closer, but the difference will still exist for a long.
Life insurance companies more than the growth of commercial banks and the transparency of China Life is China's largest life insurance companies, ICBC is China's largest commercial bank, to January 15, 2007 closing price of A shares, respectively between the market value of 1.23 1 trillion and 1.86 trillion in the global context is also at a relatively high level, but room for growth for the future they are not the same.
Difference between the two is:
A competition in the market structure is not the same as China Life holds more than 50% market share, ahead of second place competitor, Industrial and Commercial Bank of China holds about 20% of the deposit and loan market share, and with the other three state-owned commercial bank's market position No significant differences in the competitive position of China Life is clearly more to be more stable.
2, developmental stage, not the same as Chinese banks are relatively mature industry, the growth in deposits and loans each year about 15%, and in the "disintermediation" trend under the influence of the banking sector's future growth will not be with the life insurance industry in the same breath. Chinese life insurance industry is a sunrise industry in the development stage, "demographic dividend", the financial assets of structural adjustment and policy support and other factors will contribute to the rapid growth of life insurance industry. At present China's banking sector assets, financial assets accounted for more than 90% of the total, life insurance account for only 3% to 4%, while the mature markets of bank assets / financial assets at 60% to 70%, life insurance assets / financial assets at 15% and more room for future growth vary significantly.
3, the yield spread, not the same as the current trends in China's banking sector deposits and loans at 4% interest rate, already at the middle level of the world, with the advance of the next interest rate market, we expect the deposit and loan interest rate will be reduced to reduce the through the middle of the income to make up for revenue growth. China's insurance industry continue to broaden the use of funds is at the stage, with a rich variety of investment return on investment will continue to enhance the current policy of no more than the cost of capital of 2.5% interest rate cap limits is not expected to change in 2-3 years, life insurance investment funds and the yield spreads in a future expansion.
4, risk management models are not the same as life insurance companies are all the assets of the fair market pricing of bonds, funds and stocks, the possibility of default of repayment is very low, the value of assets very transparent. Although the commercial banks loans loan provisioning, but the subjective, after all, bigger than the life insurance company's assets. The use of insurance funds is concentrated in the headquarters of a unified asset management and insurance operations, which makes the internal management of moral hazard is relatively low, but also easier to implement market-oriented operations, commercial bank lending power that the great majority are located in various sub-branches, the face operational risk and moral hazard is higher than the life insurance companies, management difficulty and financial risks are also larger.
These factors from the above point of view, the valuation of life insurance companies than commercial banks, the high is expected to exceed the market value of bank shares.
China Life Insurance more than his country's growth and low financial leverage
The first is differences in the growth prospects of the industry, China's life insurance market is the world's most growth potential, and is the most promising of such potential for growth into real consumer market.
The industry trend is reflected in the national life insurance company's financial statements is the Chinese-funded life insurance company's assets to expand faster in Europe and the United States company, which quickly accumulated assets will be to promote the growth of investment income, one of the main driving force.
From the use of the degree of financial leverage, China Life Insurance in the same industry in a relatively low level, the future to further enhance the level of financial leverage and thus more opportunities to increase the level of ROE, which will lead to increase the level of valuation. China Life earned investment opportunities are not available other mature life insurance company, China Life rose even more, the rate of investment income from the investment portfolio optimization, while the mature markets to enhance the rate of a considerable part of the proceeds from the risk-free rising interest rates, this rate of return drivers of the differences led to the two investors in the valuation to determine the main reasons for disagreement.
