Asia Pacific Equity Research

02 September 2010

Ping An Insurance Group

Merger between SDB and Ping An Bank announced -
ALERT

• Transaction details: Ping An has finally announced the integration plan Insurance
involving its 29.99%-owned Shenzhen Development Bank (SDB) and its Bao Ling Chan
AC

90.75%-owned Ping An Bank. Ping An has agreed to subscribe to (852) 2800-8592

1,639mn new SDB shares valued at Rmb17.75 per share. The total baoling.chan@jpmorgan.com
consideration of Rmb29.1bn will be satisfied by the 7,825mn Ping An J.P. Morgan Securities (Asia Pacific) Limited
Bank shares owned by Ping An and cash of Rmb2.692bn (representing
the 9.25% stake in Ping An Bank currently not owned by Ping An). 2318.HK, 2318 HK
Note: SDB has priced Ping An Bank at 1.9x P/BV based on last reported Overweight
HK$64.35
net asset value of Rmb15.3bn as at 30 June 2010.
01 September 2010
• New organizational structure: Post transaction, SDB would own 601318.SS, 601318 CH
Overweight
90.75% of Ping An Bank while the enlarged SDB would become a Rmb46.81
52.39%-owned subsidiary of Ping An and SDB’s financial results would 28 June 2010
be consolidated with the group.

• The best outcome for Ping An: We see this as the best outcome for
Ping An as the transaction involves minimal capital outlay (only
Rmb2.692bn) from Ping An to gain a larger control of SDB. By
resolving the issue of having two competing banking entities, Ping An
can focus on growing one bank which is crucial for Ping An from a
branding perspective. As previously mentioned, SDB’s financial results
will be consolidated with the group. One hurdle Ping An needs to
overcome is to obtain an exemption from having to make a general offer
to SDB's shareholders.

• Positive market reaction expected: Ping An shares are expected to

resume trading on 2 September 2010. In addition to the positive reaction
to this announcement, we expect the market to play catch up on Ping
An’s strong 1H10 results which were announced during Ping An's
suspension. Both Ping An and SDB will be holding analyst briefings
tomorrow to go through the transaction, we await further details from the
companies especially with regards to merger synergies.

See page 2 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
Bao Ling Chan Asia Pacific Equity Research
(852) 2800-8592 02 September 2010
baoling.chan@jpmorgan.com

Analyst Certification:
The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research
analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
Important Disclosures

• Client of the Firm: Ping An Insurance Group - A is or was in the past 12 months a client of JPM; during the past 12 months, JPM
provided to the company non-investment banking securities-related service. Ping An Insurance Group - H is or was in the past 12
months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service.
• Non-Investment Banking Compensation: JPMS has received compensation in the past 12 months for products or services other
than investment banking from Ping An Insurance Group - A, Ping An Insurance Group - H. An affiliate of JPMS has received
compensation in the past 12 months for products or services other than investment banking from Ping An Insurance Group - A, Ping
An Insurance Group - H.

Ping An Insurance Group - A (601318.SS) Price Chart

258
Date Rating Share Price Price Target
(Rmb) (Rmb)
215 18-Jun-10 OW 45.04 59.00

172
OW Rmb5

Price(Rmb) 129

86

43

0
May Aug Nov Feb May Aug Nov Feb May Aug Nov Feb May
07 07 07 08 08 08 08 09 09 09 09 10 10

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Jun 18, 2010. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst
may or may not have covered it over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

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Bao Ling Chan Asia Pacific Equity Research
(852) 2800-8592 02 September 2010
baoling.chan@jpmorgan.com

Ping An Insurance Group - H (2318.HK) Price Chart

204 Date Rating Share Price Price Target

OW HK$70.1 OW HK$50.7 N HK$64 (HK$) (HK$)
170 05-Jan-07 N 43.65 35.00
OW HK$50.2 OW HK$54.2 N HK$61.6 OW HK$82 12-Apr-07 OW 40.30 50.20
136 17-Jul-07 OW 61.40 70.10
N HK$35 N HK$91.1N HK$73.5
OW HK$61.9 N HK$50.4 N HK$81 N
25-Oct-07 N 108.50 91.10
Price(HK$) 102 17-Mar-08 N 53.20 73.50
15-Aug-08 OW 48.30 61.90
68 16-Oct-08 OW 38.30 54.20
16-Jan-09 OW 36.35 50.70
09-Apr-09 N 48.65 50.40
34
07-Jul-09 N 55.70 61.60
15-Aug-09 N 65.00 64.00
0
Oct Jul Apr Jan Oct Jul
16-Nov-09 N 73.60 81.00
06 07 08 09 09 10 14-Apr-10 N 69.60 --
18-Jun-10 OW 62.70 82.00
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Break in coverage May 03, 2005 - Feb 08, 2006, and Apr 14, 2010 - Jun 18, 2010. This chart shows J.P. Morgan's
continuing coverage of this stock; the current analyst may or may not have covered it over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:

J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] J.P. Morgan Cazenove’s UK Small/Mid-Cap dedicated research
analysts use the same rating categories; however, each stock’s expected total return is compared to the expected total return of the FTSE
All Share Index, not to those analysts’ coverage universe. A list of these analysts is available on request. The analyst or analyst’s team’s
coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying
analyst(s) coverage universe.

Coverage Universe: Bao Ling Chan: CNinsure, Inc (CISG), China Life Insurance - A (601628.SS), China Life Insurance -
H (2628.HK), China Pacific Insurance Group - A (601601.SS), China Pacific Insurance Group - H (2601.HK), China
Taiping Insurance Holdings (0966.HK), PICC Property and Casualty (2328.HK), Ping An Insurance Group - A
(601318.SS), Ping An Insurance Group - H (2318.HK)

J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2010

Overweight Neutral Underweight
(buy) (hold) (sell)
J.P. Morgan Global Equity Research 46% 42% 12%
Coverage
IB clients* 49% 46% 31%
JPMS Equity Research Coverage 44% 48% 9%
IB clients* 68% 61% 53%
*Percentage of investment banking clients in each rating category.
For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category.

Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on
any securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named on
the front of this note or your J.P. Morgan representative.

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Bao Ling Chan Asia Pacific Equity Research
(852) 2800-8592 02 September 2010
baoling.chan@jpmorgan.com

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4
Bao Ling Chan Asia Pacific Equity Research
(852) 2800-8592 02 September 2010
baoling.chan@jpmorgan.com

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