Morgan Stanley: More positive view on Ping An Insurance (02318) with significant growth potential, raises target price to HK$89.

Morgan Stanley released a research report stating that their view on Ping An Insurance (02318,601318.SH) has become more positive. They believe the group can seize the key opportunities in wealth management, healthcare, and elderly care services, and see investors' concerns fading away, paving the way for a revaluation. They reiterated their "overweight" rating on both H shares and A shares, raising the target price for H shares by 27% to HK$89 and A shares by 21% to RMB 85. Morgan Stanley stated that Ping An Insurance's H shares remain their top choice and have added Ping An to their China/Hong Kong focus list. They also predicted that the group's return on equity (ROE) is expected to reach 14% to 15% by 2028; the compound annual growth rate (CAGR) of core new business value will rebound to 21% in the next two years; the balance of life insurance contract service margins (CSM) (retained profits to be released in the future) will recover to 1.9% growth by 2026; the compound annual growth rate of the group's operating profit will improve to 11% in the next two years, and these forecasts all indicate the transformation happening within the group. Considering Ping An's forecasted ROE of 14% to 15% in the short to medium term and a cost of capital below 10%, Morgan Stanley believes that its P/E ratio valuation can rise from the current approximately 7 times to double digits. They also believe that the group can expand into a broader market through strengthening comprehensive financial and value-added services.