Earnings Alert: PICC P&C reported a strong 1Q25 earnings alert, with net profit expected to surge 80%–100% YoY to RMB10.6bn–11.7bn, indicating a QoQ increase of 95.3%–117% compared to 4Q24.
Net Profit Contribution: The 1Q25 net profit accounted for 33%–37% of the total net profit from last year, driven by:
A largely improved Combined Ratio (CoR) due to reduced catastrophic claims.
Optimized asset allocation, shifting from FVTPL to FVOCI, which helped smooth investment income volatility and achieve steady growth amid market fluctuations.
CoR Forecast Adjustments: For FY25E, the CoR is adjusted to 95.9% (auto) / 99.0% (non-auto), reflecting:
Stricter expense controls.
Improved non-auto underwriting (UW) structure.
Auto CoR improvement due to stable average ticket sizes.
Premium Growth Expectations:
Auto: Driven by new vehicle sales growth and higher NEV (New Energy Vehicle) penetration.
Non-auto: Pared down FY25E premium growth forecast to 6%, as the insurer prioritizes profitability over UW expansion.
Investment Strategy:
The insurer has reallocated investment portfolio to FVOCI assets, which include high-yield stocks and long-term government bonds.
In FY24, FVTPL assets decreased 16.6% YoY, while FVOCI assets increased 35.3% YoY, making up 18% / 36% of the total portfolio.
In 1Q25, H-share surge and a rebounded bond yield are expected to bolster investment income.
Valuation and Target Price:
The stock is currently trading at 1.06x FY25E P/BV.
Target Price (TP) is maintained at HK$15.80, implying a 1.19x FY25E P/BV.
3-year forward ROE is at 13.6%.
EPS forecasts for FY25E–FY27E are adjusted by 3% / 1% / -1% to RMB1.62 / 1.76 / 1.91.
Key Risks:
Deteriorated CoR.
Intense equity market volatility.
Financial Highlights
Metric
FY23A
FY24A
FY25E
FY26E
FY27E
Net Profit (RMB mn)
24,566
32,161
36,050
39,166
42,469
EPS (Reported)
1.11
1.45
1.62
1.76
1.91
Consensus EPS
n.a
n.a
1.51
1.66
1.84
P/B (x)
1.2
1.1
1.0
1.0
0.9
Dividend Yield (%)
3.8
4.2
5.1
5.5
6.0
ROE (%)
10.8
13.0
13.4
13.6
13.9
Investment Asset Portfolio (FY24/FY23)
Asset Type
FY24 (RMB mn)
FY23 (RMB mn)
YoY%
Mix% (FY24)
Mix% (FY23)
Bond
259,981
206,209
26.1%
38.4%
34.3%
FVTPL
50,279
67,636
-25.7%
7.4%
11.3%
FVOCI
141,304
95,002
48.7%
20.9%
15.8%
Govt Bond
46,883
63,257
-25.9%
6.9%
10.5%
AC
68,398
43,571
57.0%
10.1%
7.3%
Equity Funds
14,687
14,647
0.3%
5.8%
4.7%
Debt Funds
22,147
31,800
-30.4%
3.3%
5.3%
Total Investment Assets
676,512
600,711
12.6%
-
-
Shareholding and Stock Data
Metric
Value
Market Cap (HK$ mn)
301,601.5
Avg 3 mths t/o (HK$ mn)
514.7
52w High/Low (HK$)
15.10 / 9.09
Total Issued Shares (mn)
22,242.0
Analyst Ratings and Recommendations
Rating: BUY
Target Price (TP): HK$15.80
Up/Downside: 16.5%
Current Price: HK$13.96
Key Forecasts and Adjustments
Metric
Current Forecast
Old Forecast
Change (%)
EPS
1.62 / 1.76 / 1.91
1.58 / 1.74 / 1.93
+2.7% / +1.1% / -1.0%
CoR
97.1% / 96.6% / 96.2%
97.2% / 96.6% / 96.2%
-0.1% / 0.0% / 0.0%
Auto CoR
95.9% / 95.8% / 95.6%
96.0% / 95.9% / 95.7%
-0.1% / -0.1% / -0.1%
Non-auto CoR
99.0% / 98.0% / 97.3%
98.9% / 97.8% / 96.9%
0.0% / +0.2% / +0.4%
DPS
0.65 / 0.70 / 0.76
0.63 / 0.70 / 0.77
+2.7% / +1.1% / -1.0%
BVPS
12.37 / 13.18 / 14.08
12.33 / 13.13 / 14.06
+0.3% / +0.3% / +0.1%
Key Forecasts Summary
Auto CoR is expected to improve slightly, driven by a stable average ticket size.
Non-auto CoR is expected to trim faster, as the insurer focuses on scaling down loss-making lines such as employer's liability insurance and credit insurance.
The investment strategy involves increasing equity allocation to high-yield stocks and long-term government bonds under FVOCI.
The dividend yield is expected to rise to 6.0% in FY27E, reflecting increased payout.
Key Risks
Deteriorated CoR could negatively impact profitability.
Equity market volatility could affect investment returns, especially given the reliance on H-share performance and bond yields.
Analyst Certification and Disclosures
The research analyst certifies that all views expressed in the report reflect personal opinions and not influenced by compensation.
The analyst confirms no trading or dealing in the stock covered in the report within 30 days prior to the report's issue and will not do so within 3 business days after the issue.
The report is not an offer or solicitation to buy or sell any security and is subject to change without notice.
CMBIGM provides information and forecasts on an "AS IS" basis and may have conflicts of interest.
Important Disclosures
The report is not tailored to individual investors and should not be relied upon without independent evaluation.
Past performance does not guarantee future results.
The value and returns of investments are uncertain and may fluctuate.
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