On Friday, Goldman Sachs adjusted its outlook on China Taiping Insurance Holdings Co Ltd (966:HK) (OTC: CINSF) shares, reducing its price target to HK$6.30 from the previous HK$6.40. The firm sustained its Sell rating on the stock. The revision follows a reassessment of the company's future earnings, specifically in its life insurance segment.
The reevaluation by the analyst at Goldman Sachs comes in the wake of a reported strong pre-tax profit of RMB 6.6 billion by Taiping Life, China Taiping's key life insurance subsidiary in mainland China. However, the subsidiary also incurred a significantly higher-than-expected tax charge amounting to RMB 5 billion.
The firm indicated that the details behind the tax charge are not fully disclosed, but it is likely connected to changes in deferred tax assets or liabilities resulting from investment outcomes.
Goldman Sachs noted that its decreased net profit forecast for the fiscal year 2024 by 10% is a direct consequence of reducing the life insurance profit estimate by 11%.
This adjustment reflects the impact of the substantial tax charge, which the firm has estimated to be around RMB 2 billion. The analyst expressed an intent to seek further clarity on these figures with the release of the first half of 2024 results.
In addition to the changes for the fiscal year 2024, Goldman Sachs also made minor adjustments to the fiscal years 2025 and 2026 estimates for China Taiping. These revisions were described as fine-tuning, suggesting smaller scale changes compared to the significant revision for the fiscal year 2024.
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