The report from "The Big Banks" has lowered the target price for China Life to 26 yuan, with limited visibility on earnings

HSBC Research published a report indicating that China Life (02628.HK) saw a 44% year-on-year increase in net profit last year, meaning a net loss of RMB 13.7 billion in the fourth quarter, reflecting the volatility of profits during market corrections. The new business value grew by 36% year-on-year, which was 11% and 8% higher than the bank's and market's expectations, respectively, mainly driven by better-than-expected profit margins for new business value. The annual dividend per share was HKD 0.856, which is 3% lower than market expectations. Shareholders' equity and embedded value were 3% and 5% lower than market expectations, respectively. The solvency ratio is expected to decline compared to 2024, mainly due to interest rate changes.

Considering the high sensitivity of China Life's net profit to stock market performance, as well as limited guidance from management on asset allocation to manage profit volatility, HSBC Research has lowered its earnings forecasts for China Life for 2026 and 2027 by 13% to 15%, with the target price reduced from HKD 28 to HKD 26. The target price for China Life (601628.SH) A shares has been lowered from RMB 49 to RMB 46, maintaining a "Hold" rating for both H shares and A shares