China Life Insurance (LFC)

China Life Insurance (LFC) is scheduled to release its FY08 financial results on March 26, 2009. 1H08 results were disappointing due to the stock market decline.

Despite growing competition as well as volatile capital market, China Life seems to be in a better position than its peers due to the current regulatory environment and its geographical positioning. Further, it has not yet successfully completed its conversion to higher margin products and its current valuation (more so after the recent sell-off) does not fully reflect its growth prospects, which we think have further improved in view of the China's stimulus package, as also the regulator's decision to allow the insurers to invest directly in the infrastructure projects.

We maintain our Buy recommendation on the shares. Based on our FY08 earnings estimate per ADS, the company is trading at 29.1x, which is much higher than the industry median. Our target price of $54.00 per ADS is based on the company selling in line with or above the insurance industry as a whole, and we have set a target P/E of approximately 31.8x our FY08 earnings estimate.