Bank of America Securities: People's Insurance Group (01339) Capital Increase and Dilution Limited Reiterates “Buy” Rating Target Price of HK$7.8

The Zhitong Finance App learned that Bank of America Securities released a research report stating that the People's Insurance Group (01339) announced the issuance of no more than 15 billion yuan of new A-share capital to the Ministry of Finance, the largest shareholder. The Ministry of Finance held about 60.8% of the Group's total share capital and 75.8% of A-shares in the first half of 2026. The placement price will be determined based on the average price for the previous 20 trading days after shareholders' and regulatory approval and when the official issuance date is announced. The bank believes that dilution is limited, keeping the profit forecast and target price unchanged, and reaffirms the “buy” rating of H shares, with a target price of HK$7.8; since the premium of A shares is about 50% over H shares, the bank gave China Insurance A shares (601319.SH) a “outperforming market” rating, with a target price of RMB 6.76 yuan.

The bank expects capital raising to be completed by the end of 2026. Immediate dilution will mainly affect the 2026 return on equity, book value per share and dividend per share. According to estimates, if the placement price is 5.8 yuan, 7 yuan and 8 yuan respectively, which is equivalent to 0.8 times the actual book value per share and 1.1 times the current book value in 2025, the return on equity will decrease by 0.3 percentage points; the book value per share will decrease by 1.4%, decrease 0.4%, and increase by 0.2%, respectively; dividends per share will decrease by 5.5%, 4.6% and 4.1%, respectively. The overall dilution is limited, and the potential benefits that may be brought about by capital injections are not taken into account. Dilution should be even lower after new capital starts contributing in 2027.

The bank pointed out that judging from the increase in premiums and insurance liabilities in the first half of 2026 by only the number of units and the core solvency ratio as high as 198%, new capital may not significantly accelerate the growth of the insurance business. Since the bottleneck is demand rather than capital, it is expected that most of the new capital will be allocated to investment in the short term. As of the first half of 2026, stocks and funds accounted for about 6% and 10% of the total investment portfolio, respectively. The bank believes there is still room to further increase their share.