1H22 results broadly in-line; agent team is stabilizing
Profitability: In 1H22, shareholders’ operating profit increased by 4.3% yoy. Shareholders’ NP rose 3.9% yoy partly due to improved investment performance and enhanced tech segment profitability. Life NBV: Life NBV dropped by 28.5% yoy in 1H22, meeting markets’ expectation (or down by 20.3% if 1H21 NBV were restated using the assumptions and method employed at end-2021). The decrease in NBV was the result of agent force contraction, NBV margin decline, and the high base particularly from 1Q21.
Life agent force: Number of agents in the individual business slightly dropped by ~4% qoq from 538k at end-1Q22 to 519k at end-1H22, or dropped by ~14% YTD from 600k at end-2021. Agent team was stabilizing at the end of 2Q22. The Company continued promoting the quality-oriented transformation of the agent force. Agent productivity measured by pre- agent NBV increased by ~27% yoy in 1H22, and pre-agent income increased by ~35% yoy. The proportion of agents with a college education background or above rose 4 pps yoy in 1H22. P&C: Aggregate COR came in at 97.3% at end-1H22 (vs. 96.8% in 1Q21 or 95.9% in 1H21). Operating profit of the P&C segment decreased by 22.3% yoy due to higher COR and lower investment incomes. Banking: Banking segment posted steady asset quality at end-1H22, with virtually unchanged NPL ratio and even lower special mention loan ratio vs. end-2021. Net profit of the segment grew fast by 25.6% yoy in 1H22. Property related risks: The management suggests that Ping An Group’s property-related risks are well under control.
The Company will continue to invest in high-quality leasing properties with sustained returns, in line with principle of allocating funds to long-duration assets to match liabilities.
Valuation, recommendation, and risks
Ping An is trading at ~0.43x 22E P/EV or ~0.7x 22E P/B, valuation undemanding. The negative NBV growth rate might continue to narrow in 2H22 in our view, given: 1) A low base from 2H21. For example, Ping An Life’s NBV dropped by 43.3% yoy in 2H21, vs. -11.7% in 1H21; 2) The stabilized agent team and the strengthened agent productivity. We maintained our 2022E NBV and revised earnings forecasts (Fig. 2), taking into account the capital market conditions. We maintain BUY for the Company on its undemanding valuation. We slightly revised TP from HKD72.4 to HKD71.4, equivalent to ~0.7x 22E P/EV or ~1.2x 22E P/B (Fig. 8). Key catalysts: robust NBV growth, good capital market; key downside risks: weak NBV growth, adverse capital market.