Recently, AIA Group (01299-HK) released its financial report for the year 2323. Analysts believe that the company faces a mix of performance and challenges, and Morgan Stanley has maintained its “overweight” rating on the stock.
In a report published this month, Morgan Stanley stated that AIA Group’s performance was resilient last year, with strong growth in new business value, leading them to uphold their “overweight” rating with a target price of 95 Hong Kong dollars.
Calculated at a fixed exchange rate, AIA’s new business value grew by 33% last year, surpassing both the bank’s and the market’s expectations by 1 to 2 percentage points. Operating earnings per share (EPS) and embedded value per share (EVPS) each saw a 2% year-on-year increase, in line with expectations. The final dividend was 119.1 HK cents per share, with the full-year dividend payout ratio slightly increasing by 1 percentage point to 38%. The annual dividend increased by 5% year-on-year, slightly exceeding expectations.
Moreover, the post-tax operating profit was $6.213 billion, a 1% decrease from the same period last year. Notably, this marks the first time since the company’s listing that operational profit has shown negative growth.
Morgan Stanley’s analysis indicated that AIA Group’s growth in new business value slowed in the last quarter of last year, mainly due to the high base effect in the Hong Kong market, which has already been reflected in the stock price. There were signs of improved profit margins in the second half of last year, particularly with a 7-percentage-point increase to 59% in the last quarter. In terms of regional business, they noted that the full-year growth in new business value in Hong Kong was 82%, driven primarily by increased demand from Mainland Chinese Visitors (MCV). New business value in the Mainland market grew by 20%, with improved profit margins in the second half of the year.
By regional segmentation, Mainland China and Hong Kong are the primary markets supporting AIA Group’s business development, with the greatest decline in new business value rates. In terms of a fixed exchange rate, Hong Kong is the largest contributing market, with strong demand from Mainland Chinese customer groups post full border reopening. Approximately half of Hong Kong’s new business value is derived from Mainland Chinese visitors. With the growth in the number of agents, new business value in Hong Kong increased by 82% in 2023. Meanwhile, the new business value profit margin in Hong Kong decreased by 12 percentage points to 57.5% compared to the same period last year.
Thailand is AIA Group’s most critical market in the ASEAN region and has the highest new business value rate. In 2023, new business value in Thailand achieved a growth rate of 21%, with a new business value rate as high as 93.3%.Jump to latest