In This Article:
PICC Property and Casualty Company Limited (SEHK:2328), a HK$238.74B large-cap, is an insurance company operating in an industry, which is a large constituent of the economy by virtue of the amount of premiums it collects and the role it plays by covering personal and business risks. Financial services analysts are forecasting for the entire industry, a positive double-digit growth of 18.98% in the upcoming year , and a massive growth of 41.27% over the next couple of years. This rate is larger than the growth rate of the Hong Kong stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether PICC Property and Casualty is a laggard or leader relative to its financial sector peers. View our latest analysis for PICC Property and Casualty
What’s the catalyst for PICC Property and Casualty’s sector growth?
Amid challenges from regulatory disruption, increasing consumer expectations and sluggish sales, insurers will increasingly consider technology integration to drive growth and efficiency. In the previous year, the industry saw growth in the teens, beating the Hong Kong market growth of 11.35%. PICC Property and Casualty lags the pack with its lower growth rate of 7.65% over the past year, which indicates the company will be growing at a slower pace than its insurance peers. However, in the upcoming year, PICC Property and Casualty is expected to deliver growth in-line with its industry peers, at a growth rate of 18.98%.
Is PICC Property and Casualty and the sector relatively cheap?
Insurance companies are typically trading at a PE of 16.69x, relatively similar to the rest of the Hong Kong stock market PE of 13.97x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 10.24% on equities compared to the market’s 9.64%. On the stock-level, PICC Property and Casualty is trading at a lower PE ratio of 9.91x, making it cheaper than the average insurance stock. In terms of returns, PICC Property and Casualty generated 15.24% in the past year, which is 5.00% over the insurance sector.
Next Steps:
PICC Property and Casualty’s future growth prospect aligns with that of the broader market and its PE is below its financial peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market hasn’t fully accounted for the growth, meaning now may be the right time to accumulate more of, or to enter into, the stock. However, before you make a decision on the stock, I suggest you look at PICC Property and Casualty’s fundamentals in order to build a holistic investment thesis.