The following excerpts explain why Zacks senior insurance sector analyst Paul Cheung, CFA remains bullish on China Life Insurance Company Ltd. (LFC), the largest Chinese life insurance company:
'China Life announced strong financial results for the first three quarters of 2007 due to robust growth in premiums and investments. It is clear that China Life is the market leader in China's life insurance industry, where opportunities are significant. Although China Life still faces growing competition and has not successfully completed its conversion to higher margin products, its current valuation does not fully reflect its growth prospects, in our view.
'China Life's extensive distribution network, solid client base, and improved management team should help the company retain its leadership position in China's life insurance industry in the near future. On October 29, 2007, China Life announced its interim results for the first three quarters of 2007. For the first three quarters of 2007, net profit were RMB24,696 million. Earnings per share for the first three quarters of 2007 were 0.87 ($1.74 per ADS). Earnings per share for the third quarter of 2007 were 0.27 ($0.54 per ADS).
'Based on our estimate for fiscal year 2007 earnings per ADS, the company is trading at 43.2x, which is much higher than the industry mean. Similarly, based on our estimate for fiscal year 2008 earnings per ADS, the company is trading at 42.4x, which is also much higher than the industry mean. Using a P/E multiple of roughly 47.0x our fiscal year 2008 earnings per ADS estimate yields a target price of $110.00, which we believe reflects the company's prospects. Therefore, we maintain our Buy recommendation on China Life shares.'
Read the full analyst report on LFC
Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all todays Analyst Blog entries on Zacks.com.