Zacks senior Chinese market analyst Paul Cheung, CFA is keeping his Buy recommendation on shares of China Life Insurance (LFC) today. Here's why:
China Life announced its annual financial results for 2006, which exceeded market consensus. 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. Therefore, we maintain our Buy recommendation on China Life shares.
China Life, with headquarters in Beijing, is China's largest life insurance company. The company is also a leading provider of annuity products and life insurance for both individuals and groups and a leading provider of accident and health insurance.
Based on our estimate for fiscal year 2007 earnings per ADS [American Depositary Share], the company is trading at 32.6x, which is much higher than the industry mean. Using a P/E [price-to-earnings] multiple of roughly 31.1x our fiscal year 2007 earnings per ADS estimate yields a target price of $65.00, which we believe reflects the company's prospects.
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