On Tuesday, HSBC revised its price target for AIA Group (1299:HK) (OTC: OTC:AAGIY), a leading life insurance group, setting the new target at HK$89.00, down from the previous HK$100.00. Despite the reduction, the firm maintained a Buy rating on the company's stock.
The update from HSBC comes after the firm made slight adjustments to its expectations for AIA Group's new business value (NBV), embedded value (EV), IFRS operating profit after tax (OPAT), and dividend per share (DPS) estimates. These changes reflect recent market movements and updates to HSBC's valuation approach. The new target price suggests approximately a 65% upside, which supports the firm's decision to continue recommending AIA Group as a Buy.
HSBC's analysts underscore that AIA Group's current valuation is appealing, trading at around 1.1 times the estimated 2024 embedded value (EV) and offering a forecasted 15.5% normalized return. The life insurer's projected price-to-earnings (PE) ratio for 2025 stands at 10.6 times, along with an implied cost of equity (COE) of approximately 14%.
The firm also noted potential risks that could affect AIA Group's stock performance. These risks include the possibility of lower-than-expected new business value growth in crucial markets, negative financial market trends, and the potential impact of the departure of key executives from the company. Despite these concerns, HSBC's stance on AIA Group remains positive, as reflected in the maintained Buy rating.
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