4 Aug 2020
CMB International Securities | Equity Research | Coverage Initiation
Ping An (2318 HK) BUY (Initiation) Explore the boundless Target Price HK$96.06 Up/Downside +18.2% Current Price HK$81.3 Throughout years, Ping An has been pushing the boundaries of finance and technology, aiming to become a world-leading technology-powered retail financial services group. Ping An’s “finance + technology” business model China Insurance Sector constitutes a positive feedback loop to drive secular growth. Its pro-innovation culture, insurance business upgrade, group finance initiatives and potential Wenjie Ding, PhD unlock of more technology value will continue to open new frontiers for Ping An. (852) 3900 0856 [email protected] Integrated financial services group. While being a leading player in life and P&C insurance, Ping An also excels in banking, trust, securities and other Hanbo Xu financial business scope. Integrated financial business model encourages (852) 3761 8725 cross-selling and synergies. [email protected]
Empowered by technology. Ping An has been standing at the forefront of Stock Data digital transformation and committed to develop state-of-the-art technologies. Mkt Cap (HK$ mn) 1,522,547 Technology has penetrated throughout the Group from front to back to boost Avg 3 mths t/o (HK$ mn) 2,910.3 52w High/Low (HK$) 99.18/67.76 business efficiency and customer experience. The Group has also incubated Total Issued Shares (mn) 7,448 (H) technology unicorns. The five major technology units include Lufax, 10,833 (A) OneConnect, Ping An Good Doctor, Ping An HealthKonnect and Autohome. Source: Bloomberg
Retail as a strong growth driver. Thanks to the integrated financial business Shareholding Structure Charoen Pokphand Group 8.02% model and “finance + ecosystem” strategy, the Group’s ecosystems and Shenzhen Investment Holdings 5.27% internet platforms have been a steady source of new customers for the Source: HKEx Group’s core business. As of YE19, the Group had 200 million retail customers. In 2019, retail accounted for 92.4% of the Group’s operating profit. Share Performance Absolute Relative Fast-evolving corporate culture embracing innovation, speed and 1-mth 0.2% 4.0% expertise constitutes the backbone of Ping An’s success story. Over years, 3-mth 3.9% 4.7% 6-mth -5.5% 1.8% Ping An has been standing at the industry forefront to embrace technological Source: Bloomberg innovations, even disruptive ones. Ping An also adheres to global corporate governance standards, with diversified board to provide professional support 12-mth Price Performance (HK$) and Co-CEO model to perform collective and effective decision-making. 120 2318.HK HSI.HI (rebased)
100 Valuation. We use SOTP method to value the Group’s life insurance business 80 at 1.24x FY20E P/EV, its P&C insurance business at 1.37x FY20E P/B, its 60 banking/asset management business at 1.28x/1.0x FY20E P/B and its five 40 20
technology units at RMB 13.61 per share. We therefore derive target price at 0 Aug-19 Nov-19 Feb-20 May-20 HK$ 96.06 per share. Initiate with BUY. Source: Bloomberg Earnings Summary Auditor: PwC (YE 31 Dec) FY18A FY19A FY20E FY21E FY22E GWP (RMB mn) 719,556 795,064 857,284 928,157 1,000,866 YoY growth (%) 18.9% 10.5% 7.8% 8.3% 7.8% Net profit (RMB mn) 107,404 149,407 150,257 171,180 192,182 EPS (RMB) 6.02 8.41 8.46 9.63 10.82 Please cast your valuable vote YoY growth (%) 31.1 39.6 0.6 13.9 12.3 for CMBIS research team in the Consensus EPS (RMB) n.a. n.a. 7.68 9.09 10.36 2020 Asiamoney Brokers Poll: P/E (x) 12.1 8.7 8.6 7.6 6.7 P/B (x) 2.4 2.0 1.7 1.4 1.2 https://euromoney.com/brokers P/EV (x) 1.3 1.1 1.0 0.8 0.7 Yield (%) 2.4% 2.8% 3.4% 3.9% 4.3% ROE (%) 20.9% 24.3% 20.4% 19.6% 18.8% Source: Company data, Bloomberg, CMBIS estimates
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Contents
Company Overview ...... 3 Investment Highlights...... 5 Integrated financial business strategy creating synergies ...... 5 Building up technological strength ...... 6 Retail business has become a strong growth driver ...... 8 Corporate culture priortizing innovation, speed and expertise ...... 10 Adhering to global corporate governance standards ...... 10 Insurance business at its core ...... 11 Life insurance – balanced growth of business and value ...... 11 P&C insurance ...... 14 Investment of insurance funds ...... 16 Banking and asset management business – riding on integrated financial layout ...... 18 Banking – Retail breakthroughs and selective corporate ...... 18 Asset management business ...... 22 Incubator of technology companies...... 24 Four-stage business model of incubating technology companies ...... 24 Lufax Holding – the largest online financial assets platform ...... 24 OneConnect (OCFT US): leading technology-as-a-service platform for financial institutions in China ...... 25 Ping An Good Doctor (1833 HK) ...... 27 Ping An HealthKonnect ...... 29 Autohome (ATHM US) ...... 29 Financial Analysis ...... 31 Insurance premium growth ...... 31 Group net profit ...... 31 Embedded value ...... 32 Valuation ...... 33 SOTP valuation ...... 33 Financial Summary ...... 36 Risks ...... 37 Appendix ...... 38 Company milestone ...... 38
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Company Overview
Ping An strives to become a world-leading technology-powered retail financial services group. In 2019, Ping An defined “finance + technology” as its core and main businesses and has also promoted “finance + ecosystem” empowerment to transform and upgrade its main businesses.
Ping An engages in three core financial businesses, which are insurance, banking and asset management through Ping An Life, Ping An Property & Casualty, Ping An Annuity, Ping An Health, Ping An Bank, Ping An Trust, Ping An Securities, and Ping An Asset Management. Ping An invests in and empowers technologies to improve efficiency, enhance risk management and cut operating costs of its financial businesses. Ping An promotes the “finance + ecosystem” empowerment to transform and upgrade its main businesses.
Meanwhile, Ping An also leverages innovative technologies and has developed five ecosystems, namely financial services, health care, auto services, real estate services, and smart city services. The five ecosystems optimize customer acquisition as well as quality and efficiency of integrated financial services.
Figure 1: Business model of Ping An
World-leading Strategic Objectives → Technology-powered Retail Financial Services Group
Industry Focuses → Pan Financial Assets Pan Health Care
Development Models → Finance + Technology Finance + Ecosystem
Financial Auto Real Estate Health Care Smart City Pillars → Insurance Banking Asset Management Services Services Services Ecosystem Ecosystem Ecosystem Ecosystem Ecosystem
Source: Company data, CMBIS
Diversified shareholding structure. As at 31 Dec 2019, Charoen Pokphand Group Ltd. indirectly held 8.97% of equity interest and is the largest shareholder of the Group. Shenzhen Investment Holdings Co., Ltd. held 5.27% of the total share capital of the Group.
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Figure 2: Shareholding structure of Ping An Group
Shenzhen Municipal People's Government Charoen Pokphand Group State-ow ned Assets Supervision and Administration Company Limited Commission
100% 100%
Business New Orient Other H Shenzhen Investment Holdings Other A Foretune Others Ventures Limited shareholders Co., Ltd shareholders Holdings Limited
3.27% 3.91% 1.79% 31.77% 5.27% 53.99%
Ping An Insurance (Group) Company of China, Ltd.
Source: Company data, CMBIS
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Investment Highlights Integrated financial business strategy creating synergies
Services provided by multi-subsidiaries improve customer satisfaction Ping An adopts an integrated financial business model of “one customer, multiple products, and one-stop services” and satisfies customer demand for integrated financial services. Ping An uses technologies to improve customer experiences and reduce costs.
Rising contributions from cross-selling Under the integrated financial business model, cross-selling grows strongly between the Group’s financial subsidiaries. Retail customers holding multiple contracts with different subsidiaries increased by 19.3% from the beginning of 2019 to 73.71 million and accounted for 36.8% of total customers as of YE19.
The corporate integrated financial business strategy also yielded initial results. Ping An Bank is the engine of the Group’s corporate business. In 2019, premium and financing referred by Ping An Bank rose 326.6% and 140.4% YoY, respectively.
Figure 3: As of YE19, 36.8% of customers held Figure 4: Each customer on average held 2.64 multiple contracts with different subsidiaries contracts with the Group
50% Number of contracts per customer 3.0 40% 2.64 2.54 2.5 2.38 36.8% 2.21 34.3% 30% 2.03 29.6% 2.0 20% 24.0%
19.0% 1.5
10% 1.0
0% 0.5 2015 2016 2017 2018 2019
% of customers holding multiple contracts with different subsidiaries 0.0 2015 2016 2017 2018 2019
Source: Company data, CMBIS Source: Company data, CMBIS
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Building up technological strength Ping An has been standing at the forefront of digital transformation and committed to developing state-of-the-art technologies. Technology has penetrated throughout the Group from front to back to boost business efficiency and customer experience. The Group has also incubated technology unicorns, which export services to create value.
Leveraging technologies to upgrade core financial business The Group leverages cutting-edge technologies to optimize its core businesses, boost operational efficiency and improve customer experience. Technologies assist in the following main areas,
1) Cost control. For example, Ping An P&C applies technologies including robots and optical character recognition to pursue robotic process automation of tasks including quotation, data entry, policy issuance, and endorsement. In retail auto insurance business, over 90% of quotes are made automatically.
2) Risk management. For example, Ping An dynamically monitored corporate credit risk with smart alert technology and gave over 3,000 warnings in 2019 with accuracy rate of 92%.
3) Business efficiency improvement. For example, Ping An developed AI-powered retail banking to enable all processes including sales, risk control, operations and management. Nearly 90% of credit cards issued by Ping An Bank were automatically approved by AI.
Industry-leading technology human resources As of YE19, the Group had built a technology team of ~110,000 technology business employees, 35,000 R&D employees and 2,600 scientists.
Moreover, Ping An has established eight research institutes, encompassing AI, blockchain, cloud computing, Fintech, Health Tech, Smart city, biomedical engineering and macro economy research, and 57 laboratories. In addition to in-house R&D resources, the Group has partnered with acknowledged universities to pursue technological breakthroughs.
Increasing patent applications and awards for technological breakthroughs As of YE19, technology patent applications of Ping An totaled 21,383. Among these, nearly 96% were for invention patents and 4,845 were filed under PCT and abroad. In 2019, Ping An ranked first in Fintech and second in digital healthtech patent applications according to incoPat Innovation Index Research Center and IPRdaily.
Figure 5: Patent applications of Ping An
Number of patent applications 25,000
21,383
20,000
15,000 12,051
10,000
5,000 3,030 837 0 2016 2017 2018 2019
Source: Company data, CMBIS
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Ping An has also won acknowledged awards for technological breakthroughs. In the AI area, Ping An ranked first in the Stanford Questions Answering Dataset 2.0 Challenge and won world championship in the English-Chinese translation challenge at the 2019 Conference on Machine Translation. In the healthtech area, Ping An won international medical imaging championships in Automatic Cancer Detection and Classification in Whole-slide Lung Histopathology (ACDC), Endoscopic Artefact Detection (EAD), and Pathologic Myopia Challenge (PALM) at the IEEE International Symposium on Biomedical Imaging (ISBI) meeting.
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Retail business has become a strong growth driver
Retail operating profit increased at CAGR of 28.4% in 2017-2019 Retail has become the growth driver of operating profit. During 2017-2019, the Group’s operating profit increased at CAGR of 18.5%, while retail operating profit at 28.4%. Corporate retail profit declined during the period. In 2019, retail accounted for 92.4% of the Group’s operating profit, while the rest was contributed by corporate and other customers.
Figure 6: Retail accounted for 92.4% of the Group’s Figure 7: Retail has been contributing to an operating profit in 2019 increasing share of the Group’s operating profit
RMB mn 100% 92.4% 86.8% 140,000 90% 10,153 78.7% 120,000 80%
14,844 70% 100,000 60% 20,181 80,000 50%
40% 60,000 122,802
97,729 30% 21.3% 40,000 74,527 20% 13.2% 7.6% 20,000 10%
0% 0 2017 2018 2019 2017 2018 2019 Retail operating profit Corporate and other operating profit Retail operating profit Corporate and other operating profit
Source: Company data, CMBIS Source: Company data, CMBIS
Customer base increased steadily The Group’s retail customers and internet users increased steadily. As of YE19, the Group had 200 million retail customers, up 11.2% YoY. Thanks to the integrated financial business model and “finance + ecosystem” strategy, the Group’s ecosystems and internet platforms have become a steady source of new customers for the Group’s core business. In 2019, the Group acquired 36.57 million new customers, among which 40.7% were sourced from internet users within the five ecosystems.
Figure 8: Number of retail customers reached 200 Figure 9: Number of internet users amounted to 515 million as of YE19 million as of YE19
RMB mn RMB mn 250 25% 600 50% Number of retail customers … YoY (RHS) Number of internet users … YoY (RHS) 45% 200.48 500 200 20% 40% 180.22 35% 156.9 400 150 15% 30% 131.07
109.1 300 25% 100 10% 20% 200 15%
50 5% 10% 100 5%
0 0% 0 0% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Source: Company data, CMBIS Source: Company data, CMBIS
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Figure 10: In 2019, 40.7% of new customers were Figure 11: As of YE19, 36.8% of customers held sourced from internet users multiple contracts with different subsidiaries
50% 50%
40.7% 40% 40% 37.2% 34.4% 36.8% 30% 34.3% 30% 29.6% 22.3% 19.4% 20% 24.0% 20% 19.0%
10% 10%
0% 0% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 % of new customers from internet users within the 5 ecosystems % of customers holding multiple contracts with different subsidiaries
Source: Company data, CMBIS Source: Company data, CMBIS
Cross-selling promotes steady increase in customer value Under an integrated financial business model, customer migrations happen among core financial companies. As of YE19, about 73.71 million, or 36.8% of retail customers held multiple contracts with different subsidiaries within the Group.
Contracts per customers was 2.64 as of YE19. The wealthier customers are, the more contracts they hold and the more value they contribute to the Group. As of YE19, each high net worth individual (HNWI), those have >RMB 10mn personal assets, held 11.93 contracts with the Group.
Figure 12: Each customer on average held 2.64 Figure 13: Wealthier customers hold more contracts contracts with the Group with the Group
Number of contracts per customer Contracts per customer by wealth structure 3.0 14 2.64 11.93 2.54 12 11.3 2.5 2.38 10.48 2.21 10 2.03 2.0 8
1.5 6 3.613.783.88 4 1.0 2.142.252.28 1.711.671.69 2 0.5 0 HNWI Affluent Middle-class Mass 0.0 2015 2016 2017 2018 2019 2017 2018 2019
Source: Company data, CMBIS Source: Company data, CMBIS * Mass customers are those with annual income below RMB100,000, middle-class customers RMB100,000-240,000, and affluent customers above RMB240,000. HNWIs have personal assets of >RMB10mn
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Corporate culture priortizing innovation, speed and expertise
Embrace innovation and speed Ping An has been standing at the industry forefront to embrace technological innovations, even disruptive ones. The Group also prioritizes speed. To secure first-mover advantages, the Group strives to predict and anticipate trends, make timely decisions and take steadfast actions ahead of peers.
Attract global talents with expertise The Group acquires, manages and retains talents following market-based process and offers competitive incentive schemes. Over years, the Group has been continuously diversifying and optimizing its talent standards.
Adhering to global corporate governance standards
Diversified board The Board is responsible for the management of the Company and accountable to the shareholders. The Board of Directors is made up of professionals with diversified background to provide support for effective decision making.
Co-CEO model The Group has established a Co-CEO mechanism, in which Co-CEOs and other functional line chiefs perform “collective decision-making, division of responsibility, matrix management”. This operational model has proved effective and mature after nearly two years’ transition. It has laid a solid foundation for Ping An’s long-term sustainable and innovation-driven development in the future.
The three Co-CEOs are led by Mr. Ma Mingzhe, who resigned as CEO of the Group since 1 Jul 2020, but continues to serve as the chairman of the Group. He still plays a core role and is responsible for the Group’s strategy development, innovation, talent cultivation, cultural construction and key decision making.
Figure 14: Co-CEOs and responsibilities Name Job title Responsibilities
Mainly responsible for the Group's financial business segment, including being responsible for Ping An Bank Co., Ltd., being in charge of managing the Group’s Mr. Xie Yonglin President and Co-CEO corporate integrated finance business and of the development of subsidiaries related to the finance segment, and jointly managing retail integrated finance business.
Mainly responsible for the Group's technology business and innovation business segments, including being responsible for the innovation and development of financial Ms. Tan Sin Yin Co-CEO technology, health technology, smart city and related ecosystems, and being in charge of the development of companies related to the technology and innovation segment.
Mainly responsible for the Group's strategy planning, business goal setting, target tracking and performance evaluation, and is in charge of the Group’s budget Mr. Yao Bo Co-CEO and CFO management committee, product committee, strategy development center, and finance and planning, actuary, capital and other management functions.
Source: Company data, CMBIS
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Insurance business at its core
The Group conducts life and health insurance business mainly through Ping An Life, together with Ping An Annuity and Ping An Health. It conducts P&C business mainly through Ping An Property & Casualty. Both Ping An Life and Ping An P&C are 99.51% owned by the Group.
Life insurance – balanced growth of business and value
Robust and continuous growth of NBV New business value of life and health insurance business rose 5.1% YoY to RMB 75.9bn in 2019. Meanwhile, NBV margin was up 3.6ppt YoY in 2019 due to the Company’s prioritization of high-value, high-protection products.
Robust and continuous NBV growth was underpinned by 1) Multi-layered product portfolio and a broader suite of protection products and long-term savings hybrid products tailored for different populations. 2) High-quality life agent team. Around 90% of overall NBV was contributed by the agent channel. NBV per agent rose 16.4% YoY in 2019, resulting in agent channel NBV rising 5.9% YoY to RMB 68.2bn in 2019. The agent channel NBV margin reached 64.9%, up 7.8 ppt YoY.
Figure 15: NBV of L&H business rose 5.1% in 2019; Figure 16: Meanwhile, NBV margin improved to agent channel contributed to ~90% of overall NBV 47.3% (overall) and 64.9% (of the agent channel)
Agent channel NBV NBV margin RMB mn NBV from other channels 80,000 … YoY growth (RHS) 80% 70% 64.9% 70% 70,000 60% 60% 50% 60,000 47.3% 50% 50,000 40% 40%
40,000 30% 30%
20% 30,000 20% 10% 20,000 10% 0% 10,000 0% -10% 2013 2014 2015 2016 2017 2018 2019 0 -20% 2013 2014 2015 2016 2017 2018 2019 NBV margin of the agent channel Overall NBV margin
Source: Company data, CMBIS Source: Company data, CMBIS
Figure 17: GWP mix of life and health insurance products
100% 4% 4% 5% 5% 4% 7% 7% 7% 8% 90% 6% 6% 6% 7% 8% 3% 4% 10% 8% 3% 5% 12% 14% 80% 9% 16% 11% 17% Investment-linked insurance 70% 14% 17% 35% 34% 33% 18% 40% Annuity 60% 30% 29% 19% Casualty & short-term health insurance 50% 25% 21% 19% Long-term health insurance 40% 17% Traditional life insurance 30% Universal insurance 49% 49% 49% 46% 42% 42% Participating insurance 20% 39% 39% 36% 29% 10%
0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: Company data, CMBIS
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Reform to pursue high-quality development of agent team Ping An is one of the first lifers in China to sell insurance products via agents in the 1990s, when most peers focused on bancassurance channels. This gives Ping An first-mover advantages.
In 2019, Ping An conducted reform in its life insurance business, to prioritize high-value protection products and achieve healthier and stable long-term value growth. A key focus of the reform was to upgrade quality of agent force through tightening agent recruitment criteria, enhancing agent management, and implementing stringent appraisal and dismissal standards. Ping An also revised the basic law for agent management to attract high-quality talent.
Figure 18: Number of Ping An’s life insurance agents Figure 19: Agent productivity measured by NBV per totalled 1.167million as of YE19 agent
Thousand RMB NBV per agent per year Number of life insurance agents YoY growth (RHS) 60,000 1,600 40% 1,417 1,386 1,400 50,000 30% 1,167 1,200 1,111 40,000 20% 1,000 870
800 10% 30,000 636 600 557 0% 20,000 400 -10% 10,000 200
0 -20% 0 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019
Source: Company data, CMBIS Source: CMBIS *NBV per agent per year is calculated as agent channel NBV/average number of agents during the year
Thick residual margin to support operating profit Ping An is among the first lifers in China to disclose residual margin data. Residual margin is the present value of future profits with release pattern locked-in at the time of policy issuance.
New business enriches residual margin. As of YE19, residual margin of the Group’s L&H business was RMB 918.4bn, up 16.8% YoY. Movement of residual margin were primarily contributed by new business. Operating variances also remained positive in recent years thanks to better-than-assumption operating results.
Figure 20: New business drives steady growth of residual margin of Ping An’s life and health insurance business RMB mn 2016 2017 2018 2019 Residual margin (beginning of the year) 330,846 454,705 616,319 786,633 Contribution from new business 129,860 168,426 177,485 155,684 Expected interest growth 17,391 22,642 28,498 33,811 Release of residual margin -38,202 -49,811 -62,287 -74,454 Operating variance and others 14,811 20,357 26,617 16,742 Residual margin (end of the year) 454,705 616,319 786,633 918,416 … YoY 37.4% 35.5% 27.6% 16.8% Source: Company data, CMBIS
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The release of residual margin represents a major source of operating profit for Ping An Life and it is immune to capital market fluctuations. In 2018/19, release of residual margin rose 25%/20% YoY, amounting to 10.1%/9.5% of opening balance of residual margin of respective years. Steady release of residual margin supported the growth of operating profit. In 2018/19, release of residual margin contributed to 64%/74% of pre-tax operating profit of the Group’s life and health insurance business.
Figure 21: Release of residual margin rose 20% YoY Figure 22: Release of residual margin amounted to in 2019 10.1%/9.5% of opening balance in 2018/19
RMB mn Release of residual margin Release of residual margin as % of residual margin at 15% 80,000 35% the beginning of the year
70,000 30% 11.3% 11.5% 11.5% 12% 11.0% 60,000 10.1% 25% 9.5% 50,000 20% 9% 40,000 15% 30,000 6% 10% 20,000
10,000 5% 3%
0 0% 2014 2015 2016 2017 2018 2019 0% Release of residual margin … YoY 2014 2015 2016 2017 2018 2019
Source: Company data, CMBIS Source: Company data, CMBIS
Figure 23: Release of residual margin accounted for 64%/74% of pre-tax operating profit of L&H business in 2018/19
Source of pre-tax operating profit, L&H business
100% 12% 14% 10% 90% 22% 80% 12% 10% 10% 70% 9% 60% 50% 40% 74% 71% 68% 30% 64% 20% 10% 0% 2016 2017 2018 2019 Release of residual margin Return on net worth Spread income Operating variance and others
Source: Company data, CMBIS
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P&C insurance
Second largest P&C insurer Ping An P&C is the second largest P&C insurance company in China by premium income, occupying market share of 20.8% in 2019 (its market share of auto insurance was 23.7%). Market share expanded steadily thanks to marketing strategy and rapid growth in non-auto insurance business.
In 2019, premium income of Ping An P&C increased 9.5% YoY to RMB 270.9bn, among which 71.7% was from auto insurance. In 1H20, premium growth of auto insurance decelerated to 3.6% YoY (vs. 6.9% in 2019).
Figure 24: Market share of Ping An P&C reached Figure 25: P&C premium income rose 9.5% YoY in 20.8% in 2019 2019 to RMB 270.9bn
RMB mn P&C premium income breakdown 30% Overall P&C market share 300,000 30% Auto insurance market share 23.7% 25% 250,000 25%
20% 200,000 20% 20.8%
15% 150,000 15%
10% 100,000 10%
5% 50,000 5%
0% 0 0% 2014 2015 2016 2017 2018 2019
Auto Non-auto Accident & health … YoY
Source: CBIRC, Company data, CMBIS Source: Company data, CMBIS
Figure 26: Premium growth of auto insurance vs. Figure 27: Monthly P&C premium growth by business non-auto insurance business lines lines
P&C premium growth 100% P&C premium growth by month 70% 59.2% 60% 80%
50% 44.4% 60% 40% 40% 30% 18.5% 20% 13.4% 14.8% 13.3% 20%
10% 6.6% 6.9% -1.8% 0% 0% 2015 2016 2017 2018 2019 -10% -20% -14.9% -20% -40% … YoY, auto … YoY, non-auto Automobile Non-automobile Accident & health
Source: Company data, CMBIS Source: Company data, CMBIS
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Industry-leading underwriting quality Ping An P&C maintained good underwriting quality, with combined ratio and ROE exceeding industry average as well as major peers’. This is attributable to 1) robust underwriting management empowered by technology; 2) risk screening and precise customer profiling technologies; 3) online customer development; 4) well-rounded services.
Figure 28: Combined ratio of Ping An P&C was 96.4% Figure 29: Ping An P&C maintained industry-leading in 2019, up 0.4ppt from 2018 and stable combined ratio
Combined ratio of Ping An P&C Combined ratio, peer comparison 100% 99.9% 100% 99.2% 90% 98.3% 98% 96.4% 80% 36.9% 37.6% 38.9% 41.5% 39.6% 41.1% 39.1% 96% 70% 94% 60% 92% 50% 90% 40% 88% 30% 60.4% 57.7% 56.7% 54.4% 56.6% 54.9% 57.3% 86% 20% 84% 10% 82% 0% 80% 2013 2014 2015 2016 2017 2018 2019 Ping An PICC P&C CPIC P&C Taiping P&C
Loss ratio Expense ratio 2017 2018 2019
Source: Company data, CMBIS Source: Companies, CMBIS
Figure 30: Combined ratio by business lines Figure 31: Operating ROE was 24.6% in 2019
Combined ratio Operating ROE 100% 30%
95% 24.6% 25% 90% 20.0% 85% 20% 16.7% 80% 15% 75%
70% 10%
65% 5% 60% Auto Guarantee Liability Accident Corporate Overall P&&C 0% 2017 2018 2019 2017 2018 2019
Source: Company data, CMBIS Source: Company data, CMBIS
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Investment of insurance funds
Steady increase of insurance funds Ping An achieved robust growth of its insurance funds during the past. As of YE19, the Group’s investment portfolio of insurance funds reached RMB 3.2tn, up 14.8% YoY.
In light of evolving capital market environment and declines of interest rate, the Group maintained stable risk appetite and robust asset allocation. In 2019, net investment yield maintained stable at 5.2%, same as 2018. Total investment yield rose to 6.9% in 2019, up 3.2ppt YoY thanks to stock market recoveries.
Figure 32: Insurance funds Figure 33: Investment yield
RMB bn Insurance funds of investment 9% 3,500 25% 3,209 8%
3,000 2,795 6.9% 20% 7% 2,449 2,500 6%
2,005 15% 5% 5.2% 2,000 1,732 1,474 4% 1,500 1,230 10% 3%
1,000 2% 5% 500 1%
0% 0 0% 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019
Investment of insurance funds … YoY Net investment yield Total investment yield
Source: Company data, CMBIS Source: Company data, CMBIS
Robust asset allocation Being among the first listed insurers to adopt IFRS9, Ping An has dynamically adjusted proportions of equity assets and increased long-term equity stakes to reduce impact of equity market volatility. As of YE19, 18.3% of insurance funds were marked-to-market through P&L and 4.5% were stocks and equity funds. Interest rate risk of fixed maturity investments booked at fair value on the balance sheet was limited — 50bps parallel increase of the government bond yield would lead to only ~3% decline in the Group’s profit.
Improve duration matching. Ping An also increased investment in long-duration rate bonds, including tax-exempt central and local government bonds to narrow the duration gap between assets and liabilities.
Non-standard assets allocation. At YE19, non-standard debt assets and equity assets accounted for 13.4% and 1.2% of the overall insurance funds. Overall risks were controllable for these assets. At YE19, these non-standard debt assets carried average nominal yield of 5.75%, with remaining maturity of 3.68 years.
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Figure 34: Portfolio of insurance funds Figure 35: Interest rate sensitivity
100% Interest rate sensitivity 90% 3.0% 15.7% 12.8% 14.0% 80% 2.0% 70% 60% 1.0% 50% 66.5% 69.7% 70.1% 40% 0.0% 30% -1.0% 20% 10% -2.0% 0% 2017 2018 2019 -3.0% Cash and cash equivalents Term deposits Debt financial assets Equity financial assets -4.0% Long-term equity stakes Investment properties & others 2014 2015 2016 2017 2018 2019
Source: Company data, CMBIS Source: Company data, CMBIS *Interest rate risk is measured by % change in Group's profit assuming +50bp parallel shift of the government bond yield curve
Figure 36: Non-standard assets accounted for 14.6% Figure 37: Structure and yield distribution of non- of total insurance funds at YE19 standard debt assets
Non-standard assets as % of total insurance funds Years 20% 5.0 6.2% 17.3% 4.55 17.0% 16% 6.00% 3.96 6.0% 14.6% 4.0 3.68
5.84% 5.8% 12% 3.0 5.75% 5.6%
8% 15.6% 15.8% 2.0 13.4% 5.4%
1.0 4% 5.2%
0% 0.0 5.0% 2017 2018 2019 2017 2018 2019
% Non-standard debt assets % Non-standard equity assets Remaining maturity (years) Average nominal yield (RHS)
Source: Company data, CMBIS Source: Company data, CMBIS *Non-standard debt assets include debt schemes and wealth management products
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Banking and asset management business – riding on integrated financial layout Banking – Retail breakthroughs and selective corporate
1) “3+2+1” models Ping An Bank (PAB) has established the “3+2+1” strategies for retail, corporate, and interbank businesses to achieve balanced business development.
Retail banking – 3 key businesses “basic retail banking, private banking & wealth management, consumer finance”, 2 core capabilities of “risk management and cost control”, 1 ecosystem to enhance integration.
Corporate banking - 3 pillars of “industry-specific banking, transaction banking and integrated finance”, 2 core customer segments of “strategic customers and SME customers” and 1 bottom line of “ensuring asset quality”.
Interbank business - 3 business directions of “new transactions, new interbank business, and new asset management business”, 2 core capabilities of “sales and transactions”, and 1 “system platform”.
Figure 38: Shareholding structure of PAB
Ping An Insurance (Group) Other shareholders 99.51% Company of China,Ltd
Ping An Life Insurance
8.38% 49.56% 42.06%
Ping An Bank
Source: Company data, CMBIS
Figure 39: “3+2+1” model for retail banking
Source: Company data, CMBIS
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Figure 40: “3+2+1” strategy for corporate banking
Source: Company data, CMBIS
2) Achieved breakthroughs in retail transformation Since 2016, Ping An Bank has furthered retail transformation. In 2019, retail banking’s revenue and net profit increased by 29.2% and 13.8% YoY, contributing to 58% and 69.1% of PAB’s total revenue and net profit, respectively. Retail banking accounted for 24% of deposits and 58.4% of loans, up 2.3ppt and 0.6ppt from the beginning of 2019, respectively.
Figure 41: Retail banking’s revenue and net profit Figure 42: Retail banking contributed to 58%/69.1% increased 29.2%/13.8% YoY in 2019 of PAB’s total revenue and net profit in 2019
RMB mn Revenue and net profit from retail banking Contribution of retail banking 90,000 80% 80% 80,000 70% 67.6% 69.0% 69.1% 70% 70,000 60% 58.0% 60,000 60% 53.0% 50% 50,000 50% 44.1% 40% 41.2% 40,000 40% 30% 30.6% 30,000 30% 20% 20,000 20% 10,000 10% 10% 0 0% FY16 FY17 FY18 FY19 0% Revenue from retail banking (LHS) Net profit from retail banking (LHS) FY16 FY17 FY18 FY19
YoY, revenue from retail banking YoY, net profit from retail banking % of revenue from retail banking % of net profit from retail banking
Source: Company data, CMBIS Source: Company data, CMBIS
Figure 43: Retail loans and deposits Figure 44: Composition of retail loans
RMB mn Share of retail loans and deposits Share Retail loan composition
1,600,000 70% 100% 90% 1,400,000 60% 26.7% 26.7% 33.5% 33.5% 35.8% 80% 41.0% 39.8% 1,200,000 50% 70% 11.0% 11.5% 1,000,000 60% 13.9% 15.1% 40% 16.9% 15.0% 17.0% 800,000 50% 15.0% 20.7% 30% 17.8% 17.6% 40% 15.4% 600,000 14.9% 27.5% 13.2% 20% 30% 30.4% 400,000 18.0% 14.0% 20% 24.4% 13.3% 11.6% 200,000 10% 10% 19.9% 15.8% 18.0% 15.8% 14.4% 10.4% 14.7% 0 0% 0% FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Retail loans Retail deposits % retail loans (RHS) % retail deposits (RHS) Mortgage loans Business loans (Xin Yi Dai) Auto Others Credit card
Source: Company data, CMBIS Source: Company data, CMBIS
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Integrated financial business model also made increasing contributions to retail banking. For example, cross-selling channels accounted for 61.3% of Xin Yi Dai unsecured loans granted and 34.1% of credit cards issued in 2019. Customers referred by the cross-selling channel have better asset quality than other customers.
3) Selective corporate banking business As a “1+N” engine of the Group’s corporate integrated finance business, PAB continued to “reinventing its corporate banking” and new businesses were concentrated on industries with sound growth and compliant with national strategic development. As of 31 Mar 2020, the balance of corporate loans/deposits rose 11.4%/3.9% from YE19 to RMB 1,076bn/1,926bn, respectively.
Figure 45: Balance of corporate loans stood at RMB Figure 46: Corporate deposits amounted to RMB 1,076bn as of 31 Mar 2020, up 11.4% from YE19 1,926bn as of 31 Mar 2020, up 3.9% from YE19
RMB bn Corporate loans RMB bn Corporate Deposits 1,200 30% 2,500 30%
25% 25% 1,000 2,000 20% 20% 800 15% 1,500 15% 600 10% 10%
5% 1,000 5% 400 0% 0% 500 200 -5% -5%
0 -10% 0 -10% 2013 2014 2015 2016 2017 2018 2019 1Q20 2013 2014 2015 2016 2017 2018 2019 1Q20
Corporate loans YoY, corporate loans (RHS) Corporate deposits YoY, corporate deposits (RHS)
Source: Company data, CMBIS Source: Company data, CMBIS
4) Enhancing asset quality PAB has steadily improved and maintained asset quality in recent years thanks to 1) business portfolio adjustment to granting more retail loans, which have better asset quality than corporate loans; 2) de-risking of corporate business by granting new loans to key industries, key regions and key customers. NPL ratio of corporate loans declined to 1.81% as of 31 Mar 2020, down 48ppt from YE19.
In 2020, however, asset quality of PAB will be under pressure due to the outbreak of COVID-19. NPL ratio deteriorated for most types of retail loans in 1Q20, such as credit card, Xin Yi Dai and auto loans. Such trend may continue since household income is likely to be dented by economic slowdown and soft job market situations. NPL ratio for corporate loans declined in 1Q20, but primarily thanks to expansion in the denominator and the policy to defer payment of SME loans.
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Figure 47: NPL ratio was 1.65% at the end of 1Q20 Figure 48: NPL ratio of corporate banking business with provision coverage ratio at 200.35% declined to 1.81% as of 31 Mar 2020
250% 2.00% NPL ratio, corporate vs. retail 1.75% 1.74% 1.70% 1.65% 1.65% 3.00% 2.68% 200% 1.45% 2.29% 1.50% 2.50% 2.22%
1.91% 1.87% 1.81% 150% 1.02% 2.00% 0.89% 1.00% 1.57% 1.52% 1.50% 100% 201.10% 200.90% 200.35% 1.18% 1.19% 183.12% 1.08% 1.07% 165.90% 0.95% 0.95% 155.40% 155.24% 151.10% 1.00% 0.78% 0.50% 50% 0.50% 0.50%
0% 0.00% 0.00% 2013 2014 2015 2016 2017 2018 2019 1Q20 2013 2014 2015 2016 2017 2018 2019 1Q20
Provision coverage ratio Non-performing loan ratio (RHS) Corporate loans Retail laons
Source: Company data, CMBIS Source: Company data, CMBIS
Figure 49: NPL recognition and credit cost Figure 50: NPL ratio by types of retail loans
300% 278.1% 4.0%
3.37% 4.0% 2019 1Q20 3.5% 3.55% 250% 225.8% 3.5% 3.17% 192.8% 3.0% 2.55% 2.54% 3.0% 200% 2.35% 2.5% 157.7% 2.5% 2.32% 2.56% 143.0% 150% 2.0% 1.55% 2.0% 1.66% 1.63% 97.4% 1.5% 100% 82.2% 1.5% 1.34% 1.07% 0.84% 1.0% 1.0% 0.74% 50% 0.5% 0.40% 0.5% 0.30%
0% 0.0% 0.0% 2013 2014 2015 2016 2017 2018 2019 Mortgages and Credit card Xin Yi Dai Auto loans Others title deed- unsecured 90 day overdue/NPL balance Credit cost (RHS) secured loans loans
Source: Company data, CMBIS Source: Company data, CMBIS
5) Resilient yields via optimization of business portfolio PAB’s net interest margin increased by 0.27ppt YoY to 2.62% in 2019 thanks to both higher assets yields and lower funding costs. As the bank enlarged the scale of higher yield retail loans, yields on interest-earning assets rose. In 1Q20, average yield of corporate loans dropped 67bps YoY whereas that of retail loans increased 27bps, thus maintaining relatively stable yields on loans overall.
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Figure 51: NIM of PAB vs. peers’ average and CMB Figure 52: Avg. yield on corporate and retail loans
% NIM Average yield 4.0 12.0% 3.5 10.0% 3.0
2.5 8.0% 2.0 1.5 6.0% 1.0 4.0% 0.5 0.0 2.0%
0.0% 2013 2014 2015 2016 2017 2018 2019 1Q19 1Q20
Joint-stock banks CMB PAB Corporate loans Personal loans Overall (excl. discounted bills)
Source: Company data, CMBIS Source: Company data, CMBIS
Asset management business The Group conducts asset management business through Ping An Trust, Ping An Securities, Ping An Financial Leasing, Ping An Asset Management, etc. Asset management business overall generated RMB 10.4bn net profit in 2019, down 24% YoY primarily due to profit volatility of trust business and impairment of some investment assets in other asset management business.
Figure 53: Ping An Trust - Fee and commission revenue declined 2.1% YoY in 2019 mainly due to Figure 54: Ping An Trust – Net profit declined 13.7% decreased assets held in trust, but fee rate rose YoY in 2019
RMB mn RMB mn Net profit of Ping An Trust 6,000 1.5% 4,500 80%
4,000 5,000 60% 1.2% 3,500
4,000 3,000 40% 0.9% 2,500 3,000 20% 2,000 0.6% 2,000 1,500 0%
0.3% 1,000 1,000 -20% 500
0 0.0% 0 -40% 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019
Fee and commission revenue Fee rate of assets held in trust (RHS) Net profit … YoY, net profit (RHS)
Source: Company data, CMBIS Source: Company data, CMBIS
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Figure 55: Ping An Trust – Assets held in trust was Figure 56: Ping An Trust strengthened active RMB 422.6bn at YE19, down 17.1% YoY management of assets held in trust
RMB mn Assets held in trust Categories of assets held in trust 800,000 50% 100% 700,000 40% 90% 24.9%
80% 40.2% 41.8% 600,000 30% 46.3% 54.0% 70% 57.7% 500,000 20% 60% 43.9% 400,000 10% 50% 29.0% 300,000 0% 40% 39.5% 34.8% 25.6% 30% 21.4% 200,000 -10% 20% 100,000 -20% 31.2% 30.8% 10% 20.9% 20.4% 18.9% 18.8% 0 -30% 0% 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019
Assets held in trust (RMB mn) .. YoY (RHS) Investment Financing Administrative
Source: Company data, CMBIS Source: Company data, CMBIS
Figure 57: Ping An Securities – net profit was RMB Figure 58: Ping An Securities – Fee and commission 2.376mn, up 41.4% YoY in 2019 on back of rising revenue increased 52.7% YoY in 2019, of which 64.9% brokerage trading volume and expanding bond and came from brokerage business and 18.2% from ABS underwriting underwriting business
RMB mn Net profit of securities business Fee and commission revenue breakdown 3,000 200%
8.4% 2019 2,500 150% 8.5% 10.4% 2,000 Brokerage business 100% 13.1% 1,500 2018 Underwriting business 50% 18.2% 1,000 57.8% Assset management business 0% 18.7% 500 64.9% Others
0 -50% 2014 2015 2016 2017 2018 2019
Net profit of securities business … YoY, net profit (RHS)
Source: Company data, CMBIS Source: Company data, CMBIS
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Incubator of technology companies
The Group conducts technology business via companies including Lufax Holding, OneConnect, Ping An Good Doctor, Ping An HealthKonnect, and Autohome. These subsidiaries are fintech and healthtech unicorns Ping An has successfully incubated throughout years.
Four-stage business model of incubating technology companies Ping An’s business model of incubating technology subsidiaries contains four stages, 1) platform establishment; 2) traffic and data accumulation, in which subsidiaries rapidly expand customer base and acquire data and traffic; 3) revenue growth, in which value per customer is enhanced; 4) profit contribution, in which economies of scale and positive profit contribution is achieved.
While Autohome and Lufax Holding have already been contributing positive profit to the Group, Ping An Doctor is experiencing rapid revenue growth. OneConnect and Ping An HealthKonnect are striving to expand user base and accumulate data and traffic.
Figure 59: Four stages of incubation of tech companies
Source: Company data
Lufax Holding – the largest online financial assets platform Lufax Holding is a world-leading online wealth management and retail lending technology platform. In 2018, Lufax Holding completed its Series C financing at a post-money valuation of US$ 39.4bn.
In wealth management business, Lufax Holding provides the middle class with diversified financial products and services. In light of strong regulation of the industry, Lufax adjusted its product portfolio. At YE19, customer assets under management dropped by 6.1% YoY to RMB 346.86bn mainly due to reduction in consumer finance products. Meanwhile, Lufax achieved growth in standardized products and customer assets sourced via other financial institutions as it deepened cooperation with trust companies and banks. In 2020, Lufax
PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 24 4 Aug 2020 continued to rebuild the scale of customer assets, which increased 2.3% from YE19 to RMB 354.85bn as of 31 Mar 2020.
In retail lending, Lufax had provided 12.37 million SME business owners and retail customers with O2O lending services. In light of tightening regulation of P2P lending, Lufax had stopped adding new P2P assets since Sep 2019 and actively sourced diversified institutional funding to meet customer demand. At YE19, Lufax had RMB 462.2bn loans under management, up 23.2% YoY. The balance further rose to RMB 506.3bn as of 31 Mar 2020, up 9.5% from YE19.
Figure 60: Customer assets rose 2.3% from YE19 to RMB 354.8bn Figure 61: Optimizing portfolio of customer assets
RMB mn Customer assets … YoY, customer assets (RHS) RMB mn Breakdown of customer assets 500,000 80% 461,699 400,000 450,000 438,379 7,409 19,266 2.3% 60% 350,000 400,000 369,414 65,225 346,856 354,848 300,000 350,000 40% 175,089 250,000 178,621 300,000 250,977 200,000 250,000 20% 178,328 150,000 200,000 0% 100,000 150,000 186,916 169,507 50,000 103,303 100,000 -20% 50,000 0 2018 1H19 2019 0 -40% 2015 2016 2017 2018 2019 1Q20 Consumer finance Standard products Business cooporation
Source: Company data, CMBIS Source: Company data, CMBIS
Figure 62: Balance of loans under management stood Figure 63: At YE19, Lufax had 44.02 million at RMB 506.3bn, up 9.5% from YE19 registered users on its platform
RMB mn Users (mn) Balance of loans under mgmt. User metrics of Lufax 50 600,000 .. YoY, balance of loans under mgmt. (RHS) 300% 44.02 45 40.35 9.5% 40 500,000 250% 33.83 35 28.38 30 400,000 200% 25 18.31 300,000 150% 20 12.5 15 11.17 9.61 8.31 10 200,000 100% 12.37 3.63 10.28 5 7.49 100,000 50% 0 1.24 3.77 2015 2016 2017 2018 2019 Registered users Active investor customers* 0 0% 2015 2016 2017 2018 2019 1Q20 Accumulated borrowers
Source: Company data, CMBIS Source: Company data, CMBIS * Active investor customers refer to customers who made an investment or had a positive account balance in the past 12 months.
OneConnect (OCFT US): leading technology-as-a-service platform for financial institutions in China OneConnect is a leading technology-as-a-service platform for financial institutions in China. OneConnect established initial operation as the financial technology solution arm of Ping An Group. Since the end of 2015, it had started to operate as a separate company and in
PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 25 4 Aug 2020
Nov 2017, OneConnect ceased to be consolidated with Ping An Group. In Dec 2019, OneConnect was successfully listed on the New York Stock Exchange.
Investment highlights of OneConnect include,
1) Massive market space. Technology spending of financial institutions is estimated to grow at CAGR of 21.4% from 2018 to 2023E, implying huge market opportunities for technology-as-a-service platforms;
2) Leading technology and industry know-hows to enable digital transformation of financial services. Over years, OneConnect has leveraged its partnership with Ping An Group to establish world-leading technology capabilities for financial services in AI, big data analytics, blockchain and etc.
3) Transaction-based revenue model and “adopt-deepen-integrate” customer- development approach, which generate visible and recurring revenue streams.
4) Rapid expansion in client base and revenue. In 2019, OneConnect had 473 premium customers (referred to those contributed at least RMB 100,000 annual revenue), compared to 40 in 2017. Revenue increased 64.7% YoY in 2019 to RMB 2,328mn.
5) Strategic relationship with Ping An Group, as a partner for technology development, a supplier for application scenarios, which will continue to contribute to future growth of OneConnect.
Figure 64: Technology spending for Chinese financial institutions is estimated to grow at CAGR of 21.4% in 2018-23E
(in RMB bn) 2018 2023E CAGR 2018-23E Banking 116.5 264.8 17.8% Insurance 28.8 109.2 30.5% Asset management 6.8 26.8 31.6% Total 152.1 400.8 21.4% Source: OneConnect Prospectus, CMBIS
Figure 65: Key financial information of OneConnect
RMB mn 2017 2018 2019 YoY (2017 -18) YoY (2018-19) Implementation revenue 51 296 571 483.2% 92.9% Transaction-based and support revenue 531 1,118 1,757 110.4% 57.2% Revenue 582 1,413 2,328 142.9% 64.7% Cost of revenue (483) (1,025) (1,561) Gross profit 99 389 767 291.1% 97.3% R&D (537) (459) (956) SG&A (478) (962) (1,392) Others 26 (82) (119) Operating loss (890) (1,114) (1,701) Attributable net loss (607) (1,196) (1,661) Source: OneConnect annual report, CMBIS
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Figure 66: OneConnect – 76% of revenue was from Figure 67: OneConnect – Non-IFRS gross profit was transaction-based and support revenue in 2019 RMB 1,080.1mn in 2019 with 46.4% margin
Revenue of OneConnect Non-IFRS gross profit of OneConnect RMB mn RMB mn 2,500 150% 1,200 150% 2,328
1,000 2,000 120% 120%
800 1,500 1,413 90% 90% 600 1,000 60% 60% 582 400 500 30% 30% 200
0 0% 0 0% 2017 2018 2019 2017 2018 2019 Implementation revenue Transaction-based & support revenue Non-IFRS gross profit Non-IFRS gross profit margin (RHS) … YoY, revenue (RHS)
Source: Company data, CMBIS Source: Company data, CMBIS
Figure 68: OneConnect – 56% of revenue in 2019 was Figure 69: Number of premium customers rose to 473 generated from premium customers in 2019
Source of revenue Number Premium customers RMB mn 100% 500 10.0 473 450 9.0 90% 8.6 80% 400 8.0
59.3% 56.1% 350 7.0 70% 61.2% 60% 300 6.0 250 5.0 50% 221 200 4.0 40% 3.9 150 3.0 30% 2.8 42.7% 100 2.0 20% 40.5% 37.3% 50 40 1.0 10% 0 0.0 0% 2017 2018 2019 2017 2018 2019 Number of premium customers Revenue per premium customer (RHS) Ping An Group Premium customers Other customers
Source: Company data, CMBIS Source: Company data, CMBIS *Premium customers are defined as non-Ping An Group customers that contribute annual revenue of at least RMB 100,000 to OneConnect. **Ping An Group customers include Ping An Group and its consolidated subsidiaries.
Ping An Good Doctor (1833 HK) Ping An Good Doctor is the largest online health care services platform in China. As of YE19, it had over 315 million registered users and 66.9 million MAU in Dec 2019. The Company was established in 2014 and listed on Hong Kong Stock Exchange in May 2018. As of 30 Jul 2020, Ping An Group held 41.31% of issued shares of Ping An Good Doctor.
Investment highlights. 1) Great potential for Internet healthcare industry. In particular, the COVID-19 has significantly improved public awareness and acceptance of online health care. 2) Amiable policy environment. China has promulgated policies to bring online consultation into full play, encourage the development of online health care, and cover online health care expenses with local Social Health Insurance. 3) Extensive online and offline coverage to provide seamless O2O health services. 4) Leading technology and AI-based medical system to provide online medical consultation services. 5) International reach. Ping An Good Doctor has offered online health care services in Indonesia and Japan in cooperation with international partners.
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Synergy with and reliance on Ping An Group. 1) Users from the plug-in of Ping An Group accounted for 50.8% of registered users as of YE19. 2) Revenue from related-party transactions, i.e. from entities controlled by Ping An, accounted for over 44% of Ping An Good Doctor’s total revenue in 2019. On the one hand, great synergy with the Group health care ecosystem is one of the strengths of Ping An Good Doctor. However, on the other hand heavy dependence on the Group remained one of the risk factors with respect to growing external user base and achieving higher margin.
Figure 70: Ping An Good Doctor – User metrics Figure 71: Ping An Good Doctor – Revenue
Million 350 Number of registered users RMB mn 6,000 Revenue … YoY, revenue (RHS) 250% MAU in the month of Dec 300 5,000 200% 250
4,000 200 150%
3,000 150 100% 100 2,000 66.9 54.7 50% 50 29.5 1,000
0 0 0% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Source: Company data, CMBIS Source: Company data, CMBIS
Figure 72: Ping An Good Doctor – Revenue Figure 73: Ping An Good Doctor – Gross profit margin breakdown by business segments by business segments
Gross profit margin 90% 81.5% 81.6% 3.8% 2019 80% 16.9% 70% 4.7% 12.3% Online medical services 60%
46.2% Consumer healthcare 50% 44.2% 40.1% 36.0% 27.1% 40% 201 Health mall 22.0% 30% 55.9% 57.3% 20% Health mgmt and 10.8% 8.1% wellness interaction 10%
0% Online medical Consumer Health mall Health mgmt and services healthcare wellness interaction 2018 2019
Source: Company data, CMBIS Source: Company data, CMBIS
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Figure 74: Ping An Good Doctor – Related party Figure 75: Ping An Good Doctor – Non-IFRS adjusted transactions contributed to 44% of revenue in 2019 net loss was RMB 695mn in 2019
RMB mn Non-IFRS adjusted net profit RMB mn 2,500 90% 2015 2016 2017 2018 2019 80% 0
2,000 70% (200) 60% 1,500 50% (400) -323
40% 1,000 (600) 30%
20% -695 500 (800) -740 10%
0 0% (1,000) -924 -982 2016 2017 2018 2019
Revenue from related party transactions As % of total revenue (RHS) (1,200)
Source: Company data, CMBIS Source: Company data, CMBIS
Ping An HealthKonnect In 2018, Ping An HealthKonnect completed a Series A financing at post-money valuation of US$ 8.8bn. Ping An Group held 38.54% of ordinary shares of Ping An HealthKonnect as of YE19.
Highlights. Ping An HealthKonnect 1) Offers closed-loop solutions of “software + services” for the healthcare ecosystem, leveraging its experience in social health insurance, medical, health and disease management; 2) Covers all participants of the health care ecosystem, including social health insurance, private insurers, medical service providers, pharmaceutical companies and the insured population; 3) Provides users with targeted, efficient expense control services through its Digital Risk System (DRS), which is capable of identifying 40 typical social health insurance fraud scenarios; 4) Enjoys high entry barrier for “technology + ecosystem”. Ping An HealthKonnect has developed AI, blockchain, cloud computing and a powerful medical knowledge bank; 5) Made breakthroughs in 2019 in winning bids for “macro-decision making big data application subsystem” and “operation monitoring subsystem” of the National Healthcare Security Administration as well as provincial/municipal projects in Shandong.
Autohome (ATHM US) Autohome is a leading internet-based auto service platform in China and is committed to providing auto consumers with diversified products and services. Ping An Group is the controlling shareholder of Autohome, holding 52% of equity interest and voting rights as of YE19.
Investment highlights. 1) Large and active online community of auto consumers, with a growing user base (daily active users ); 2) Successful transition to a data and technology driven platform covering the whole life cycle of automobile ownership; 3) Maintained steady growth in revenue and net profit despite weak market environment. In 2019, revenue of Autohome totaled RMB 8,421mn, up 16.4% YoY. Revenue from online marketplace business/media services/lead generation services accounted for 17.7%/43.4%/38.9% of total revenue in 2019. Net profit attributable to Autohome was RMB 3.2bn, up 11.5% YoY
PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 29 4 Aug 2020 in 2019; 4) Collaboration and integration with Ping An Group to progress on auto-financing business including loans, leasing and insurance.
Figure 76: Autohome – revenue breakdown Figure 77: Autohome – attributable net profit
RMB mn Revenue RMB mn 10,000 3,500 70% 3,200 9,000 3,000 2,871 60% 8,000 17.7%, 1,491
7,000 11.8%, 854 2,500 50% 6,000 2,002 2,000 40% 8.3%, 467 38.9%, 3,276 5,000 39.7%, 2,871 1,500 30% 4,000 40.5%, 2,288 1,228 991 3,000 1,000 20% 2,000 48.5%; 3,508 43.4%; 3,654 51.2%; 2,892 500 10% 1,000
0 0 0% 2017 2018 2019 2015 2016 2017 2018 2019 Media services Leads generation services Online marketplace and others Attributable net profit … YoY (RHS)
Source: Company data, CMBIS Source: Company data, CMBIS
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Financial Analysis Insurance premium growth We expect life and health insurance (L&H) GWP to grow 6.0%/6.7%/6.2% YoY to RMB 648.1/691.4/734.3bn in 2020/21/22E. Lackluster premium growth in 2020E is due to negative impact of COVID-19 and transition of Ping An Life. We forecast premium income of P&C insurance to grow 10.3%/11.2%/10.7% YoY to RMB 298.7/332.1/367.7bn in 2020/21/22E.
Figure 78: L&H premium growth estimate Figure 79: P&C premium growth estimate
RMB bn L&H: GWP RMB bn P&C: GWP 1,000 40% 1,000 40% 900 35% 900 35% 800 30% 800 30% 700 25% 700 25% 600 20% 600 20% 500 15% 500 15% 400 10% 400 10% 300 5% 300 5% 200 0% 200 0% 100 -5% 100 -5% 0 -10% 0 -10% 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E
Life & health GWP … YoY, L&H GWP P&C GWP … YoY, P&C GWP
Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates
Group net profit We expect the Group’s net profit to increase 0.6%/13.9%/12.3% YoY in 2020/21/22E to RMB 150.3/171.2/192.2bn on steady growth of each business segment. We forecast profit growth to be modest in 2020E due to the COVID-19 impact and relatively high base in 2019, though equity investment income is likely to be lifted by booming sentiment of the stock market.
Figure 80: Group net profit estimate Figure 81: Profit breakdown estimate
RMB bn Group net profit 300 50% 100% 5.8% 5.0% 7.0% 8.0% 16.7% 13.9% 90% 12.3% 12.0% 250 40% 13.0% 13.0% 80% 12.8% 14.2% 15.7% 16.0% 15.0% 15.0% 200 30% 70% 10.9% 60% 14.1% 150 20% 50% 40% 100 10% 66.2% 67.0% 30% 62.5% 65.0% 64.0% 55.0% 50 0% 20% 10% 0 -10% 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 0% 2017 2018 2019 2020E 2021E 2022E Net profit … YoY, net profit L&H P&C Banking Others
Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates
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Embedded value At YE19, the Group’s embedded value was RMB 1.2tn, up 19.8% YoY. Embedded value of life and health business (L&H) accounted for 63.1% of Group EV and achieved operating ROEV of 25% in 2019. NBV of L&H rose 5.1% YoY in 2019 thanks to improving agent productivity and NBV margin expansion.
We expect life NBV to decline in 2020 as a result of 1) negative impact from COVID-19, and 2) Ping An Life’s business transition and consolidation. In 2021/22E, we forecast life NBV to turn positive growth at +8.5%/+6.5% YoY, respectively. NBV margin of agency channel is assumed to stay largely stable thanks to continuous optimization of Ping An Life’s product portfolio.
We expect group EV to increase 13.3%/14%/13.2% YoY to RMB 1,382.4/1,575.4/1,783.8bn in 2020/21/22E.
Figure 82: We expect life NBV to increase Figure 83: We expect NBV margin of agency channel 8.8%/+8.5%/+6.5% in 2020/21/22E to remain largely stable
RMB mn Life NBV and growth NBV margin of agency channel 90,000 80% 80%
80,000 70% 70% 70,000 60% 60% 60,000 50%
50,000 40% 50%
40,000 30% 40% 30,000 20% 30% 20,000 10% 20% 10,000 0%
0 -10% 10% 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 0% New business value .. YoY (RHS) 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E
Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates
Figure 84: Life EV estimate Figure 85: Group EV estimate
RMB bn L&H: EV and oeprating ROEV RMB bn Group: EV and growth 2,000 50% 2,000 50% 1,800 1,800 40% 40% 1,600 1,600 1,400 1,400 30% 30% 1,200 1,200 1,000 20% 1,000 20% 800 800 10% 10% 600 600 400 400 0% 0% 200 200 0 -10% 0 -10% 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E
Embedded value of L&H Operating ROEV of L&H (RHS) Group Embedded value … YoY (RHS)
Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates
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Valuation SOTP valuation We use sum-of-the-parts method to value Ping An Group. We separately value the Group’s 1) life insurance business, 2) P&C insurance business, 3) banking business, 4) asset management business and 5) technology business.
Life and P&C Insurance business. We measure the Company’s life insurance business at 1.24x FY20E P/EV based on 3-year average ROEV of 19.4% and P&C insurance business at 1.37x FY20E P/B based on 3-year average ROE of 21.2%. The Group’s life insurance and P&C insurance business are evaluated at RMB 60.45/RMB 8.17 per share, respectively.
Banking business. Our current target price for Ping An Bank is RMB 19.8 (equiv. to 1.28x FY20E P/B) whereas the Group, together with Ping An Life, holds 57.94% equity stake in PAB. Therefore, the implied value of PAB to the Group is RMB 12.18 per share. (Please refer to Ping An Bank’s recent report by CMBIS. Link.)
Asset management and other business. We measure this segment of business at 1.0x FY20E P/B, which corresponds to RMB 7.02 per share.
Technology business, we evaluate the five technology units, Lufax, Ping An Good Doctor, OneConnect, Ping An HealthKonnect and Autohome at market value if listed or at the post- money value of the latest financing. We multiply each unit’s valuation with Ping An’s shareholding in it and then sum up the five units’ value to Ping An Group, which totaled HK$ 277.26bn or HK$15.17/RMB 13.61 per share.
Figure 86: Evaluating Ping An Group’s five technology business units Company Ticker Valuation/Market cap PA Group's shareholding Value to PA Group (HK$ bn) Lufax Unlisted US$39.4 bn 40.61% 124.80 Ping An Good Doctor 1833 HK HK$142. bn 41.27% 58.60 OneConnect OCFT US US$8.8 bn 36.61% 25.23 Ping An HealthKonnect Unlisted US$8.8 bn 38.54% 26.45 Autohome ATHM US US$10.4 bn 51.99% 42.17
Total (HK$ bn) 277.26
Tech value per share (HK$) 15.17 Tech value per share (RMB) 13.61 Source: Company data, Bloomberg, CMBIS *As of 28 Jul 2020. Exchange rate assumption: USD/CNY = 7.0; USDHKD = 7.8.
Summing up valuation of the above business segments for Ping An and applying conglomerate discount of 10%, we derive Ping An’s target price at HK$ 96.06 per share. Our target price corresponds to 1.97x/1.67x YE20/21E P/B.
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Figure 87: SOTP Valuation of Ping An Group Life insurance 3-year avg. ROEV 19.4% Terminal growth rate 2% Cost of equity 16.0% Fair P/EV (x) for life insurance business 1.24 Life EV per share (at YE20, in RMB) 48.66 Value of Life insurance per share (in RMB) 60.45 P&C insurance 3-year avg. ROE 21.2% Fair P/B ratio for P&C business 1.37 P&C BVPS (at YE20, in RMB) 5.97 Value of P&C per share (in RMB) 8.17 Banking CMBI target price of PAB (in RMB) 19.8 PAB issued shares (million) 19,406 Ping An's sharehoidng in PAB 57.94% Value of PAB per share (in RMB) 12.18 Asset management and others Fair P/B ratio 1.00 BVPS (at YE20, in RMB) 7.02 Value of AM business per share (in RMB) 7.02 Technology business Value of tech business per share (in RMB) 13.61 Sum of the above business segments (in RMB) 101.42 Conglomerate discount 15% Target price (in RMB) 86.21 Target price (in HKD) 96.06 Source: Company data, Bloomberg, CMBIS estimates *Exchange rate assumptions: USDCNY = 7.0; USDHKD = 7.8.
Figure 88: Forward P/EV band Figure 89: Forward P/B band Forward P/EV (H-share) 3.6 1.8
1.6 3.1
1.4 2.6
1.2 2.1 1.0 1.6 0.8
0.6 1.1
0.4 0.6
0.2
0.0 2015-07 2016-07 2017-07 2018-07 2019-07
Source: Bloomberg, CMBIS estimates Source: Bloomberg, CMBIS estimates
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Figure 90: Valuation table of China insurance companies H-shares
Price TP P/E (x) P/B (x) P/EV (x) TP/EV (x) Div. yield (%) Company Ticker Upside Rating (HKD) (HKD) FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E CHINA LIFE-H 2628 HK 17.90 24.95 39.4% BUY 9.46 8.38 1.05 0.97 0.44 0.41 0.62 0.56 3.8 4.2 PING AN 2318 HK 81.30 96.06 18.2% BUY 9.64 8.29 1.75 1.52 0.97 0.85 1.14 1.00 3.0 3.5 CHINA PACIFIC-H 2601 HK 22.50 33.93 50.8% BUY 7.13 6.49 0.94 0.86 0.43 0.39 0.64 0.59 6.5 7.0 NEW CHINA LIFE-H 1336 HK 30.25 37.30 23.3% BUY 6.48 5.90 0.91 0.81 0.39 0.36 0.48 0.44 4.4 4.8 CHINA TAIPING IN 966 HK 13.86 20.54 48.2% BUY 5.98 5.27 0.59 0.53 0.29 0.26 0.42 0.39 2.2 2.8 PICC GROUP-H 1339 HK 2.55 4.33 69.8% BUY 5.12 4.72 0.51 0.46 - - - - 4.6 5.2 PICC P&C-H 2328 HK 6.08 9.83 61.7% BUY 5.51 5.11 0.66 0.61 - - - - 7.6 8.3 ZHONGAN ONLINE-H 6060 HK 46.35 Revising n/a BUY 474.21 103.29 4.08 3.94 - - - - 0.0 0.0 Average(excl. Zhong An) 0.92 0.82 0.50 0.45 0.66 0.60 4.58 5.13 Source: Bloomberg, CMBIS estimates
Figure 91: A/H premium 20% 15% 10% 5% 0% -5% -10% -15% -20%
Source: Bloomberg, CMBIS
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Financial Summary
Income statement Key ratios YE 31 Dec (RMB mn) FY18A FY19E FY20E FY21E FY22E YE 31 Dec FY18A FY19E FY20E FY21E FY22E GWP & policy fees 719,556 795,064 857,284 928,157 1,000,866 Group Net earned premiums 677,703 748,779 803,549 868,192 934,234 Net investment yield 5.2% 5.2% 5.4% 5.2% 5.2% Reinsurance income 7,966 7,572 9,036 9,563 10,256 Total investment yield 3.7% 6.9% 6.0% 6.0% 5.8% Total premium income 685,669 756,351 812,585 877,754 944,489 ROAE 20.9% 24.3% 20.4% 19.6% 18.8% ROAA 1.6% 1.9% 1.7% 1.8% 1.8% Investment income 120,520 201,738 209,819 230,304 252,760 EV growth 21.5% 21.8% 13.3% 14.0% 13.2% Net inv't income from banking 74,783 90,187 103,227 112,414 123,199 Group comprehensive solvency 216.4% 229.8% 228.4% 225.3% 222.4% Net fees and commission income 37,191 44,230 61,819 68,870 76,929 Claims and benefits (439,596) (578,313) (614,286) (660,793) (707,796) Life & Health insurance Comission expenses (130,394) (114,766) (124,999) (136,013) (147,286) GWP growth 21.5% 11.5% 6.0% 6.7% 6.2% G&A expenses (151,581) (177,164) (196,328) (212,294) (231,239) Agency FYRP growth -3.1% -7.8% -3.7% 7.7% 5.0% Impairment loss (53,814) (67,266) (71,198) (76,172) (81,640) NBV growth 7.3% 5.1% -8.8% 8.5% 6.5% Other income and expenses 2,299 6,518 6,356 10,540 13,772 NBV margin of agency channel 57.1% 64.9% 61.8% 61.7% 61.7% Associates/JVs 18,074 23,224 24,832 26,678 28,291 L&H EV growth 23.5% 23.5% 17.4% 15.9% 14.9% Pretax profit 163,151 184,739 211,827 241,289 271,480 L&H operating ROEV 30.8% 25.0% 20.3% 19.4% 18.5% P&C insurance Tax (42,699) (20,374) (44,733) (50,608) (56,663) GWP growth 14.5% 9.5% 10.2% 11.2% 10.7% Less: minorities (13,048) (14,958) (16,836) (19,501) (22,635) Combined ratio 96.0% 96.4% 95.9% 96.2% 96.3% Net profit 107,404 149,407 150,257 171,180 192,182 Profit breakdown Life & health insurance 62% 66% 67% 65% 64% P&C insurance 11% 16% 16% 15% 15% Balance sheet YE 31 Dec (RMB mn) FY18A FY19E FY20E FY21E FY22E Banking 13% 12% 12% 13% 13% Investment assets 4,056,704 4,659,117 5,225,641 5,815,960 6,477,061 Others 14% 6% 5% 7% 8% Loans to customers 1,929,842 2,240,396 2,457,308 2,727,612 3,027,650 Total assets 7,142,960 8,222,929 9,085,927 10,037,79 11,105,02 Per share data Insurance contract liabilities 2,264,634 2,669,673 3,041,297 3,419,217 3,826,357 EPS (RMB) 6.02 8.41 8.46 9.63 10.82 Customer deposits 2,114,344 2,431,713 2,730,342 3,030,680 3,364,055 DPS (RMB) 1.72 2.04 2.47 2.81 3.15 Total liabilities 6,459,317 7,370,559 8,071,079 8,845,048 9,711,619 BVPS (RMB) 30.44 36.82 43.84 51.53 60.20 Shareholders' equity 556,508 673,161 801,479 941,975 1,100,447 EVPS (RMB) 54.84 65.67 75.66 86.22 97.62 Source: Company data, CMBIS estimates
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Risks
Life insurance business transition 2020 is the year of transition for Ping An Life, in terms of management team change, agent team consolidation and product portfolio optimization. Life insurance business is also negatively affected by COVID-19. We expect Ping An Life’s FYRP and NBV growth to be under pressure in 2020E.
Subsidiaries facing market or industry risks For example, Ping An Bank is confronted with NIM pressure and the risks of deteriorating asset quality in light of decline of corporate borrowing rate and COVID-19. Ping An Trust is facing the environment of industry AUM contraction sand tightened regulations.
Subsidiaries’ dependence on Group Ping An Group is the flagship customer of many of its subsidiaries. For example, Ping An Good Doctor obtained 50.8% of its registered users from plug in of Ping An Group account and 44% of its revenue from entities controlled by Ping An Group in 2019. Ping An Group offers mass opportunities for cross-selling and synergy, but heavy reliance on the Group could render subsidiaries vulnerable to any slowdown of Group growth.
Management team capability and corporate governance The success of Ping An relies to a great extent on its management team making correct business decisions to foresee and capture market opportunities, its pro-innovation culture, and its openness to attract talents with various backgrounds. Therefore, any potential change in management team and corporate strategy may raise concerns over whether Ping An would be able to maintain its corporate culture.
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Appendix Company milestone
Year Event Description
1988 Founding of the Company Ping An Insurance Company was established as the first joint-stock insurance company in China.
1992 Expanding nationwide The Company was renamed Ping An Insurance Company of China, becoming a national insurance company.
1994 Foreign investors Ping An brought on board Morgan Stanley and Goldman Sachs as its shareholders, becoming the first financial institution in China to have foreign investors.
Life insurance agent team Ping An introduced the individual life insurance marketing system, pioneering individual life insurance business in China.
1995 Founding of Ping An Securities Ping An made a breakthrough in non-insurance financial business by establishing Ping An Securities Co., Ltd.
1996 Founding of Ping An Trust & Ping An acquired ICBC Pearl River Delta Financial Trust Joint Investment Company, which was then renamed Ping An Trust & Investment Company.
2002 Stake acquired by HSBC HSBC Group took a stake in Ping An, becoming its single largest shareholder.
2003 Founding of the Group Ping An Insurance (Group) Company of China, Ltd. was established, becoming a pilot company for integrated operations in China’s financial industry.
2004 H-share listing Ping An Group enhanced its capital strength by going public in Hong Kong, which was the largest IPO in Hong Kong that year.
2006 Zhangjiang operation center Ping An’s national integrated operations center in Zhangjiang, Shanghai started operations, which was the largest integrated operations platform in Asia.
Acquired Shenzhen Commercial Bank Ping An acquired Shenzhen Commercial Bank, which was later renamed Ping An Bank.
2007 A-share listing Ping An Group was listed on the Shanghai Stock Exchange, which was the world’s largest IPO of an insurance company by then.
2011 Acquiring SDB Ping An became the controlling shareholder of Shenzhen Development Bank, which later merged with the original Ping An Bank, was renamed Ping An Bank, and built banking business presence across the country.
2012 Lufax Lufax was established as Ping An began to build presence in fintech and healthtech.
2016 Record high premium Ping An Life’s written premium exceeded RMB 300bn, and new business premium exceeded RMB 100bn.
2018 Ping An Rural Communities Support In response to the government’s call for poverty alleviation, Ping An launched the Ping An Rural Communities Support (covering village officers, village doctors and village teachers) in nine provinces or autonomous regions across China at the 30th anniversary.
2019 Listing of OneConnect OneConnect completed its initial public listing on the NYSE, being the first U.S.-listed technology company incubated by Ping An. Source: Company data, CMBIS
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Disclosures & Disclaimers Analyst Certification The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report. Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report.
Disclosure CMBIS or its affiliate(s) have investment banking relationship with the issuers covered in this report in preceding 12 months.
CMBIS Ratings BUY : Stock with potential return of over 15% over next 12 months HOLD : Stock with potential return of +15% to -10% over next 12 months SELL : Stock with potential loss of over 10% over next 12 months NOT RATED : Stock is not rated by CMBIS
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