[ET Net News Agency, 7 August 2020] Nomura reduced its target price for PICC P&C
(02328) to HK$9.02 from HK$10.17 and maintained its "buy" rating.
The research house expects PICC P&C to report a net profit decline of 23% for 1H,
implying a 43% decline for 2Q, because of a high-base effect (the company booked a
CNY4.2bn one-off tax refund in 2Q 2019).
Net profit before tax is likely to have risen 9.4% in 1H, thanks to strong investment
income (up 15%), but underwriting profit down 3.9%.
Looking ahead, auto insurance reform, which is supposed to kick off by end of this year,
will add pressure to both top line and bottom line, and Nomura expects the auto combined
ratio to get worse before it gets better. In addition, recent top management changes add
uncertainty. It increased its combined ratio forecast for FY2020 by 1.0pp to 99.5% and cut
earnings forecast by 12% for FY2020-22. (KL)