JP Morgan has reiterated its overweight rating on Prudential PLC (LSE:PRU), saying the negative market reaction to the insurer’s first-half results was overdone.
The bank said concerns over first-half new business profit growth and the outlook for Mainland China Visitor business in Hong Kong after Decree 837 tax changes were understandable.
JP Morgan said the market was extrapolating too much from a first-half result affected by changes in business mix and tough comparators.
The bank said Prudential met or exceeded consensus expectations for first-half 2026 new business profit, earnings and cash flow.
Management also provided detailed regional guidance that JP Morgan said supported improved growth momentum in the second half of 2026.
JP Morgan said Prudential’s shares were pricing in a contraction in growth that it did not expect to occur.
The shares traded at about 9.5 times estimated 2027 earnings, a 15% discount to European insurers that the bank said offered half Prudential’s growth.
JP Morgan also said Prudential traded at a discount of about 25% to 30% to AIA Group, at 0.75 times estimated 2027 embedded value.
The bank said Prudential’s free cash generation implied a high single-digit free cash flow yield and pointed to continued upside to its capital-return forecasts.
JP Morgan said the combination of Prudential’s growth outlook and valuation supported its positive stance on the shares.
The bank’s assessment also highlighted the potential for stronger capital returns, with free cash generation providing scope for its forecasts to move higher.
