Re-rating potential on improving profitability
​Reiterate BUY and lift TP to NT$42: We remain positive on China Life given 1) robust recurring income growth thanks to having the highest recurring yield with more extra overseas investment quota and stronger asset growth vs peers; and 2) declining F/X hedging costs in 2017F driven by USD appreciation. Although we expect falling bond values to lower China Life’s BVPS by NT$8.4 (~30% of 2017F BVPS) in the short term, they are unlikely to impact China life’s EV and RBC. Considering the company’s strong earnings growth of 19% YoY and higher ROE of 14% in 2017F, we lift our TP to NT$42 after raising its 2017F P/EV multiple from 0.65x to 0.7x, which is at the midpoint of its historical six-year range of 0.4-1x.
China Life Insurance Co., Ltd. is a Taiwan-based company principally engaged in insurance business. The Company provides personal life insurance, personal injury insurance, personal health insurance, interest rate related pension, pension insurance, travel insurance, investment insurances and group insurance, among others. The Company also provides related services, including ordinary services and value-added services. Its ordinary services include the operation of policy loans and contract change, among others. Its value-added services include overseas first aid services, hospital discount and cancer consulting services, among others. The Company is also involved in securities investment, properties investment, foreign investment and loan businesses.
Yuanta is a Taiwan-headquartered brokerage with a growing presence in Asia, especially across Greater China. Our team of 140+ provides cutting-edge analysis on key sectors, spread across offices in Taiwan, Hong Kong, Shanghai (A-Share), Seoul and Jakarta. With an ever-expanding coverage universe of 400+ companies, we provide in depth analysis with unique local color to investors. Consistently being voted the Best Investment Consulting Firm in Taiwan in the AsiaMoney broker poll is evidence of our strength. We target providing an extensive range of research, from small, to mid-sized, to large cap. We bring you the big, well-covered names, as well as going off the beaten track to research the less-familiar companies.
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