Target $70 on China Life Shares

China Life (LFC - Analyst Report) announced disappointing financial results for the first quarter of 2008 due to a big decline in China's stock market. 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 volatile capital market, 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.

Based on our estimate for fiscal year 2008 earnings per ADS, the company is trading at 30.0x, which is much higher than the industry mean. Based on our estimate for fiscal year 2009 earnings per ADS, the company is trading at 28.1x, which is still much higher than the industry mean. Using a P/E multiple of roughly 31.3x our fiscal year 2009 earnings per ADS estimate yields a target price of $70.00, which we believe reflects the company's prospects.

Read the full analyst report on LFC.