China Life Inexpensively Priced

China Life Insurance Company Ltd. (LFC - Analyst Report) announced disappointing financial results for 1H08 due to the stock market decline in China during that period. It is clear that the company is the market leader (42.8% market share in 1H08) in China's life insurance industry, where opportunities are significant.

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, in our view.

Therefore, we maintain our Buy recommendation on the shares. Our target price of $45.00 per ADS is based on the company selling in line or above the insurance industry as a whole, and we have set a target P/E of approximately 18.4 times our 2008 earnings estimate of $2.44 per ADS.

Read the full analyst report on LFC

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