DCF Studio

    2628.HK · HKG · Financial Services

    China Life Insurance Company Limited

    Also onConsensus Drift

    Implied value per share

    HKD 42.23

    Market price

    HKD 29.38

    Implied upside

    +43.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · CNY model at 1.1708

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedReports in CNY, trades in HKD. Modelled in CNY, converted at the end.
    AdjustedConsensus rests on as few as 1 analyst estimate(s).
    AdjustedReported capital expenditure averages just 0.81% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.07% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    NoteRisk-free rate is an assumption: HKD assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    HKD 42.23+43.8%
    Exit multiple
    HKD 27.17-7.5%
    Market price
    HKD 29.38

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (CNY). Outflows negative.

    0bn51bn101bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayCNY
    LineFY26FY27FY28FY29FY30CAGR
    RevenueCNY 546.3bnCNY 493.2bnCNY 445.3bnCNY 402.0bnCNY 362.9bn-9.7%
    EBITCNY 114.8bnCNY 103.7bnCNY 93.6bnCNY 84.5bnCNY 76.3bn-9.7%
    NOPATCNY 103.8bnCNY 93.7bnCNY 84.6bnCNY 76.4bnCNY 69.0bn-9.7%
    Add depreciation & amortisationCNY 5.9bnCNY 5.3bnCNY 4.8bnCNY 4.4bnCNY 3.9bn-9.7%
    Less capital expenditureCNY -5.9bnCNY -5.3bnCNY -4.8bnCNY -4.3bnCNY -3.9bn-9.7%
    Less increase in working capitalCNY -2.5bnCNY -2.3bnCNY -2.1bnCNY -1.9bnCNY -1.7bn-9.7%
    Free cashflow to firmCNY 101.3bnCNY 91.5bnCNY 82.6bnCNY 74.5bnCNY 67.3bn-9.7%
    Discount factor0.95600.87360.79830.72950.6667-
    Present valueCNY 96.8bnCNY 79.9bnCNY 65.9bnCNY 54.4bnCNY 44.9bn-17.5%
    Present Value Of The ForecastCNY 341.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate3.20%HKD assumption - no free live source available for this market (assumption)
    Equity risk premium7.00%Market assumption
    Beta0.920Reported 0.880, pulled toward 1.0 (Blume)
    Cost of equity9.64%Risk-free + beta x equity risk premium
    Cost of debt5.20%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationCNY 830.4bn95.8% of capital
    Total debtCNY 36.8bn4.2% of capital, book value as a proxy
    Tax rate9.6%Effective, capped at statutory
    WACC9.43%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareCNY 36.07

    63% of EV

    Forecast FCFF, final year
    CNY 67.3bn
    Capex at depreciation, working capital in reinvestment
    CNY 69.0bn
    Less reinvestment at g/ROIC (16.0% of NOPAT)
    CNY -11.1bn
    Capitalised
    CNY 57.9bn
    ROIC (reported)
    15.6%
    Terminal value, undiscounted
    CNY 857.1bn
    Terminal value, discounted
    CNY 571.4bn
    Enterprise value
    CNY 913.3bn
    Less net debt
    CNY -106.5bn
    Equity value
    CNY 1019.8bn

    Exit at 3.9x EBITDA

    Value per shareCNY 23.20

    38% of EV

    Terminal value, undiscounted
    CNY 311.4bn
    Terminal value, discounted
    CNY 207.6bn
    Enterprise value
    CNY 549.5bn
    Less net debt
    CNY -106.5bn
    Equity value
    CNY 656.0bn

    Spread between methods: 43%.

    Sensitivity

    Value per share (CNY) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.43%43.7145.3147.2249.5652.47
    8.43%38.5539.5640.7242.0943.72
    9.43%34.6935.3436.0736.9237.89
    10.43%31.6832.1132.5933.1233.73
    11.43%29.2729.5529.8730.2130.59

    Outlined: this model. Green text: above today's price of 25.09. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-9.7%-18.4%-8.7pp
    EBIT margin21.0%13.9%-7.1pp
    Discount rate9.4%13.9%+4.5pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.