According to a research note from JPMorgan, CHINA LIFE (02628) has issued a positive profit alert, forecasting its interim net profit to increase by approximately 215% to 235% year-on-year, reaching between RMB 128.9 billion and RMB 137.1 billion. This figure is close to the bank's and the market's full-year net profit forecast for 2026. The bank anticipates a positive short-term reaction in the share price due to the profit alert significantly exceeding expectations. However, given that a substantial portion of the profit growth is expected to stem from investment returns, it is estimated that investors will likely focus more on the potential for an increase in dividends. JPMorgan maintains its "Overweight" rating on China Life with a target price of HK$40.
JPMorgan noted that China Life indicated its robust first-half earnings were supported by several factors, including stringent asset-liability management, product diversification, liability cost control, and effective investment execution. The bank's analysis shows that for every 10% rise in the CSI 300 Index, the sensitivity of its 2026 market net profit forecast is 56%. This implies that the strong first-half performance is not solely a reflection of the stock market's gains. The report also pointed out that China Life paid its first interim dividend for 2025 at RMB 0.238 per share, with a full-year dividend of RMB 0.86 per share, representing payout ratios of 16% and 18% respectively. JPMorgan views the market's forecast for 2026 earnings per share dividend, which is only a 5% year-on-year increase to RMB 0.89, as overly conservative. If China Life maintains a stable payout ratio, there is potential for this year's dividend per share to double, contingent upon stability in the A-share market.
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