Investment Recommendation

PRE_BUY_TP 22,000_The future of reinsurance industry_BSC Company Report

Valuation

BSC issues a BUY recommendation on PRE stocks with a target price of VND 22,000/share for 2021 based on P/B method with the target P/B ratio = 1.7x.

Forecast of business performance

In 2020, revenue from insurance activities is estimated at VND 809 billion(+17.7% yoy), EBT will reach VND 183 billion (+7.4% yoy), equivalent to BVPS at VND 12,189/share.
In 2021, BSC forecasts revenue from insurance activities is estimated at VND 912 billion (+12.7% yoy), PBT will reach VND201 billion (+9.9% yoy) with the assumption: Premium collection grows 5.3% YoY. The gross and net return on investment of investment assets are 8.3% and 8.1%, respectively. The combined ratio is 89.4%, the loss ratio is 46%, the expense ratio is 43.3%.

Investment thesis

The reinsurance market is expected to grow 10% - 15%/year following the growth momentum of the non-life insurance industry.
PRE is one of the leading companies in the field of reinsurance.
PRE performs better with a better combined ratio than other players in the industry.

Investment risks

Interest rates in the coming time may be decreased to an 1-year average VNIBOR ~5.5%, affecting the PRE’s financial income.
The complicated development of the Covid-19 epidemic makes the property and technical insurance sector may not have a strong growth rate.