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EXTREMELY INTERESTING CONFIGURATION
We rarely start our analyses with charts as we normally use them to time our investment recommendations. But the technical configuration of CHINA LIFE 2628 HK is one that deserves attention.
As the long term chart shows, CHINA LIFE is currently trading on a MAJOR LONG TERM SUPPORT that has held and marked turning points ever since 2009. One could conclude that the stock is on the verge of breaking down to new lows, as it did briefly in March 2020, but the most interesting part of this chart is the red line that plots the evolution of CHINA LIFE’s revenues since 2005.
As can be seen, the disconnect between the share price behaviour and the growth of the underlying business is striking, leaving ing CHINA LIFE 2628 HK at valuations metrics not seen since 2009.
BUY CHINA LIFE INSURANCE 2628 HK
@ HKD 15.98
China Life Insurance Company Limited (short China Life, ) is the biggest life insurer in China in terms of total assets. The Company is headquartered in Beijing and is 70% owned by the Chinese State.
China Life has more than 600,000 agents nationwide, making its cost of acquiring new customers relatively low. China Life has a substantial share of China’s group life and health insurance business, and its government ties give it an inroad to help it build that business among state-owned enterprises.
Despite a highly competitive market with numerous digital insurance entrants, China Life remains the largest player in china’s ever-growing life insurance, asset management and retirement product markets.
China Life operates in four primary segments: Life Insurance (more than 80% of total revenue), Health Insurance (around 15% of revenue), Accident Insurance, and Other (less than 5%, combined).
China Life also controls China Life Asset Management Company, making it one of the largest insurance asset managers in the nation.
In 2019, despite the complicated situation of increased risks and challenges at home and abroad, China Life concentrated on the strategic goal of “China Life Revitalization” with “Dual Centers and Dual Focuses” as its strategic core, adhered to the overall keynote of making steady progress, and upheld the operational guideline of “prioritizing business value, strengthening sales force, achieving stable growth, upgrading technology, optimizing services, and guarding against risks.”
The company accelerated the establishment of a development system of “Yi Ti Duo Yuan” with strengthened individual agent channel in coordination with other channels as well as a market-oriented investment management system, strengthened technological empowerment, focused on the transformation of sales and the development of protection-oriented business, reformed its sales models, investment and services systems, constantly improved the efficiency of risk prevention and control, and achieved the coordinated growth of business scale and value.
The company employs 104’000 people and generates revenues of US$ 130 Billion per annum.
2020 saw revenues grow 10.6 % to an all-time high but net profits declined 12 % due to financial markets performance. The company should reach new all-time highs in revenues and earnings per share in 2021 and 2022 and should benefit form the strong rally with expect in the Chinese financial markets in these coming two years.
The following chart shows analysts expectations for the development of earnings per share over the next three years.
CHINA LIFE INSURANCE trades at the cheapest metrics ever with a P/E ratio of 7.6 x. a dividend yield of 4.8 % and a Price-to-Book ratio of 0.84x
Analysts are uniformly bullish with a large gap between the current price of 16 and the average target price of 22.76 , a 42 % upside from current levels
Morningstar’s SELL rating is an error as their target price is 26.
As the daily chart below shows, in the past two months, the volatility on the stock has decreased to abnormally low levels within the extended consolidation triangle in place since last July. This is usually a sign a that a sharp move is about to happen very soon.
As the weekly chart shows,. the stock is now trading on this extremely strong long term support and IT IS ONLY A MATTER OF DAYS OR WEEKS BEFORE SEEING A MAJOR BREAK OUT.
Considering the valuation levels and the strength of the long term support, our assessment is that then breakout will be to the upside and could be extremely sharp .
We do not have the assurance that the breakout will not be to the downside and we do not have a BUY TECHNICAL SIGNAL just yet,
But we see the current level as a great buying opportunity and if the break out were to be to the downside, it would not be lasting ion our view, giving an opportunity to Buy even more.
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