Daiwa Research raised its target price for PICC Property and Casualty (02328) to HK$11.5 from HK$10.2 and upgraded its rating to "buy" from "outperform".
The research house believes PICC's profitability has troughed and expects a structural
turnaround in CoR (combined ratio) from 2H onward. It expects PICC to see a strong CoR improvement of 200bps and net profit tripling in its upcoming 3Q results.
Daiwa looks for its ROE to rise from 11.3% in 2018, to 13.3% in 2019 (excluding one-off tax impact), and 14.1% in 2020 and 14.6% in 2021. It now sees visibility for a sustainable ROE of 15%, with little balance-sheet and interest-rate risk. Daiwa raised its 2019-21 net profit by 2-6% on more optimistic CoR expectations.
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