On April 8th 2020, in our article titled WATCH CHINA LIFE INSURANCE, we highlighted the fact that China Life was at a stage that deserved investors attention..
Q1 2021 earnings and 2020 results
Today, the company reported its earnings for the first quarter of 2021, revealing a 67 % increase in net profits when compared to the previous year same quarter.
It also announced last week the audited consolidated results of the Company (China Life Insurance Company Limited and its subsidiaries) for the year ended 31 December 2020
- As at the end of 2020, total assets reached RMB4,2 Trillion ( USD 646 Billion ), an increase of 14.1% when compared to 2019.
- In 2020, the Company’s total revenues increased by 10.3% year on year; the Company’s gross written premiums increased by 8.0% year on year, maintaining its industry leadership position.
- As at the end off 2020, China Life’s investment assets reached RMB 4 trillion, an increase of 14.6% year-on year
- in 2020, net profit attributable to shareholders was RMB 50.268 Billion, a decrease of 13 % when compared to 2019, due to lower sales due to COVID 19
- The board of directors of the Company recommended the payment of a final dividend of RMB 0.64 per share (inclusive of tax) representing a dividend yield of 4.82 %
Short Term Technical Analysis
The announcement of the Q1 results today sent the stock up 1.53 % higher on high volumes, improving markedly the technical picture of the stock.
Year to date downtrend (dashed blue line) was broken on April 22 after the stock challenged a major support (red dashed line) @ HKD 15.40 on April 15.
- Today’s intraday high @ HKD 16.20 targetted MA50 @ HKD 16.21 on significant volume.
- Narrowing Bollinger bands show a very low level of volatility. Until today’s rally, demand and supply were in a fine state of balance.
- The subsequent widening of the bands could trigger a sharp price move.
- MA 20 crossover was validated by closing price @ HKD 15.92. Technically, it’s a Buy signal.
- 1st target price @ HKD 16.75
- 2nd target price @ HKD 18.48
As we have been highlighting in our previous articles, the striking feature concerning China Life Insurance (2628 HK) is that it is currently trading on a major long term support dating back to 2006 and 2009, while the value of the company as measured by the evolution of its Book value per share has grown from RMB 4.5 to RMB 16.5 over the same period.
As a result, the company valuation metrics have never been so cheap historically with a P/E ratio at 6.5 x and and Price to Book Value ratio at 0.81x.
The sharp increase ( + 67 % ) in net profits in q1 2021 shows that China Life has turned the corner of the 2020 downdraft and will resume its path of positive earnings growth in the years to come with +14 % and + 9.9 % growth expected in 2021 and 2022 respectively
We see the current levels as very attractive for long-term investors wanting to invest in the world’s largest insurance company serving the world’s largest market for insurance, asset management and retirement products.
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