20230316-招银国际-保诚-02378.HK-15__APE_growth_in_2M23__Minimal_exposure_to_US_banking_sector_12页_1mb

Prudential Plc. (2378 HK) Summary

Core Content

Prudential Plc. (2378 HK) is a global insurance and financial services company with a focus on Asia. The document outlines its financial performance, market exposure, and future outlook.

Financial Performance

• FY22 Results:

  • Group NBP (Net Premium Basis): Declined by 11% on a constant exchange rate (CER) basis due to interest rate assumption changes.
  • Excluding negative economic assumptions: Group NBP decreased by 4% YoY.
  • Total DPS (Dividend per Share): Increased by 9% YoY to 0.1878 US$.

• 2M23 Performance:

  • Group APE (Adjusted Premiums Earned) Growth: Accelerated to 15% YoY on CER basis.
  • Drivers of Growth:
    1. Upbeat MCV (Mainland China Visitors) business momentum in Hong Kong.
    2. Robust new business growth in mainland China driven by multi-channel distribution of CPL (China Property & Casualty).
    3. Continued positive growth in Indonesia since 4Q22.

• Capital Position:

  • GWS GPCR (Group Written Surrender Value Gross Profit to Capital Ratio): Stood at 302% at end-FY22, indicating a sound capital position.

Key Market Insights

• Asia-Pacific Growth:

  • China JV (CPL): APE growth of 14% on AER basis, with a 19% YoY increase.
  • Hong Kong: APE growth of -5% YoY on AER basis.
  • Indonesia: APE growth of 2% YoY on AER basis.
  • Malaysia: APE growth of -17% YoY on CER basis.
  • Singapore: APE growth of 6% YoY on AER basis.
  • Growth Markets and Others: APE growth of 22% YoY on CER basis.

• NBP Growth:

  • China JV (CPL): NBP growth of 10% YoY on AER basis.
  • Hong Kong: NBP growth of -48% YoY on AER basis.
  • Indonesia: NBP growth of 0% YoY on AER basis.
  • Malaysia: NBP growth of -31% YoY on AER basis.
  • Singapore: NBP growth of -5% YoY on AER basis.
  • Growth Markets and Others: NBP growth of 13% YoY on AER basis.

• Expected Performance in FY23:

  • The company anticipates a strong VNB (Value of New Business) growth due to the rally in HK MCV business, strong growth momentum in China JV, and recovery of Indonesia business.
  • The document expects 20%+ NBP growth in 2023.

Valuation and Investment Outlook

• Valuation Metrics:

  • P/EV (Price to Earnings to Value): Trading at 0.8x P/EV FY24E and 1.9x P/BV FY24E.
  • Dividend Yield: Expected to increase from 1.4% in FY22 to 6.0% in FY25E.
  • ROE (Return on Equity): Expected to rise from 5.9% in FY22 to 20.6% in FY25E.

• Target Price:

  • HK$143.00 (Maintained from previous target).
  • Upside/Downside: 31.4% from current price (HK$108.80).

• Shareholding and Performance:

  • Market Cap: HK$299,091.2 million.
  • Share Performance:
    • 1-month: -11.0%
    • 3-months: +2.6%
    • 6-months: +27.4%

• Shareholding Structure:

  • BlackRock: 8.5%
  • Vanguard: 5.6%

Exposure to US Banking Sector

• Exposure to US Banking Sector:
  • Total exposure to corporate debt of the US banking sector amounted to US$1.1bn, which is <1% of total investment assets.
  • Exposure to SVB and Signature Bank: Only US$1mn, which is <0.01% of total debt holdings.

IFRS 17 & 9 Impact

• Book Value:

  • Would have increased by US$1.8-2.7bn under IFRS 9 & 17 as of end-FY21.
  • OPAT (Operating Profit After Tax): Would have declined by US$0.65-0.85bn in FY22.

• Contractual Service Margin (CSM): Approximately US$25bn as of end-FY21, unwinding at 9-10% per annum.

• IFRS 17 Equity Adjusted Book Value: Around US$43bn at end-FY21, 10% below the EEV (Estimated Equity Value).

Analyst Recommendation

• Rating: BUY
• Reason: The company is expected to see 20%+ NBP growth in FY23, supported by strong performance in HK MCV business, mainland China JV, and Indonesia. The valuation is seen as attractive, with a 0.8x P/EV for FY24E.

Future Outlook

• The document highlights the potential for 20%+ NBP growth in FY23.
• The rally in HK MCV business and recovery of Indonesia are expected to continue.
• The China JV is noted for its robust new business momentum.
• The stock is projected to deliver strong returns with the current BUY recommendation.

Additional Information

• The report includes multiple figures and tables showing:

  • NBP and APE growth across different regions.
  • Valuation metrics such as P/EV and P/BV.
  • Profitability indicators like ROE and ROA.
  • Investment portfolio and shareholding structure.
  • Earnings and balance sheet data for multiple years.

• The report is issued by CMB International Global Markets Limited, a subsidiary of China Merchants Bank.

• Important Disclosures:

  • The report is not tailored to individual investors.
  • It is not an offer to buy or sell any securities.
  • CMBIGM is not a registered broker-dealer in the U.S. or U.K. and is not subject to certain regulations in these regions.

• Ratings:

  • BUY: Potential return of over 15% over next 12 months.
  • OUTPERFORM: Industry expected to outperform the relevant market benchmark.

Conclusion

Prudential Plc. (2378 HK) is a company with a strong presence in Asia, particularly in Hong Kong, China, and Indonesia. Despite a decline in group NBP in FY22, the company is expected to show strong growth in FY23, driven by MCV business momentum, China JV performance, and Indonesia recovery. The capital position remains sound, and the valuation is attractive. The BUY recommendation is reiterated, with the target price at HK$143.00.