# 2318 中國平安 Embedded Value

per 12/04 report:the embedded value is only 372 億
VS existing market price of $ 17.15 X by 61.95 億 of issued share =>the whole co's market price is 1062 億
i.e. ALL shareholder are paying extra 690 億 to exchange for existing profit of 44 億/ yr + future growth

If assume 15 % compound growth in coming 10 yrs:
i.e. 44 + 51 + 58 + ......+ 135 + 155 in yr 10

the co's 10 yr profit will be 893 億 ==> 30% Div.payout ==> 268 億
say market price is 12 PE ==> i.e. 1860 億

In summary:
we pay 1062 億 NOW to exchage 2128 億 (Div. of 268 + market price 1860) after 10 yrs.
i.e. on average 8.0% compound growth ==> not attractive for long term investment .


Even assume 20 % compound growth in coming 10 yrs:
i.e. 44 + 52.8 + 63.4 + ......+ 189 + 227 in yr 10
the co's 10 yr profit will increase to 1142 億.

in summary:
we are paying 1062 億 NOW to exchage 3067 億 (Div of 343+ market price of 2724) AFTER 10 yrs.
i.e. on average only 12.5 % compound growth within the 10 yrs ==> the return is just OK for a long-term investment.

IF apply 30% expected growth rate, i.e. (44 + 57.2 + ......+ 359 + 467) =1875億 ==> so in yr 10 , the expected profit will be 467 億 i.e. 10.6 times of existing profit level of 44 億.

As a result , the compound growth will increase to 21.6 % ! ==> of course, return is attractive !