20260324-招银国际-众安在线-06060.HK-Net_earnings_weakened_in_2H_ZA_Bank_hit_first_full-year_profit_9页_806kb

ZhongAn (6060 HK) Company Update Summary

Core Content

ZhongAn, a leading Chinese insurance and technology company, reported its FY25 results with a net profit of RMB1.1bn, a 83% increase YoY, slightly below the CMBI estimate of RMB1.2bn. The adjusted net profit reached RMB1.8bn, up 198% YoY, driven by a one-off impairment loss on its joint venture ZhongAn International. The combined ratio (CoR) improved to 95.8% YoY, outperforming the CMBI estimate of 96.6%, due to strong performance in the Health and Auto segments.

Key Financial Highlights

• Net Profit: RMB1.1bn (FY25) vs. CMBI estimate of RMB1.2bn (-9%).
• EPS: RMB0.70 (FY25) vs. CMBI estimate of RMB0.80 (-13%).
• ROE: 4.8% (FY25) vs. CMBI estimate of 5.6% (-0.8pct).
• GWP Growth: 6.9% YoY to RMB35.7bn, led by Auto (+35%) and Health (+23%).
• CoR by Segment:
  • Health: 92.1% (vs. estimate 96.1%) due to AI-driven cost efficiency.
  • Auto: 93.1% (vs. estimate 94.1%) with a slight increase in claims ratio.
  • Digital Lifestyle: 99.9% (vs. estimate 99.5%) flat YoY.
  • Consumer Finance: 97.0% (vs. estimate 89.0%) due to a proactive reduction in insured loans.

ZA Bank Performance

ZA Bank achieved its first full-year profit of HK$17.27mn in FY25, driven by:

• A strong net revenue of HK$892mn (+62.7% YoY).
• A significantly improved cost-to-income ratio to 77.7% (-32pct YoY).
• A 0.28pct increase in net interest margin (NIM) to 2.69%.

ZA Bank is expected to see double-digit net profit growth in FY26E, supported by its diversified product offerings and scalability.

Valuation and Target Price

• Target Price (TP): Revised down to HK$18.00 (from HK$23.00), implying 1.1x FY26E P/B.
• Current Price: HK$13.15, with a 36.9% upside to TP.
• P/B Ratio: 0.7x FY26E, close to its 3-year mean-1STD.
• Valuation Methodology:
  • P&C Insurance: 1.0x P/B.
  • Domestic Tech Export: 11.4x P/E.
  • Overseas Tech Export: 1.0x ARR multiple.
  • ZA Bank: 1.8x P/B.

Market Outlook and Key Drivers

• Health and Auto Segments: Expected to remain key drivers of UW profit and sales growth in FY26E and FY27E, due to their large TAM and AI-driven cost efficiency.
• Consumer Finance: Likely to continue contraction, affecting CoR and GWP growth.
• Investment Income: Normalized net investment income expected in FY26E, with reduced volatility due to more prudent equity investment returns.

Key Risks

1. Intensified industry competition impacting premium sales and customer wallet share.
2. Deteriorated loss ratio due to economic shocks or increased catastrophic claims.
3. Expense overruns.
4. Prolonged low-interest rate environment and heightened equity market volatility.
5. Slower-than-expected topline growth or margin deteriorations for ZA Bank.

Analyst Ratings and Recommendations

• CMBI Rating: BUY.
• Target Price: HK$18.00.
• Reasoning: Reflects a more prudent investment return assumption amid market volatility and a revised valuation model.

Shareholding and Financial Overview

• Shareholding Structure:
  • Ping An Insurance Group: 9.2%
  • Shenzhen Jiadexin Inv Co Ltd: 8.2%
• Stock Performance:
  • 12-month price performance: -21.2% absolute, -12.4% relative.
• Financial Summary:
  • Insurance Revenue: Increased from RMB27,535mn in 2023A to RMB33,485mn in 2025A.
  • Total Assets: Rose from RMB42,864mn in 2023A to RMB52,763mn in 2028E.
  • Share Capital: Increased from 1,470mn in 2023A to 1,685mn in 2025A.
  • Total Shareholders' Equity: Increased from RMB20,073mn in 2023A to RMB28,759mn in 2028E.

Peer Comparison

ZhongAn's valuation is compared with global digital banks, with the average FY26E P/B at 1.8x, and the company's TP of HK$18.00 aligns with a 1.1x FY26E P/B.

Disclosures

• The report is prepared for informational purposes only and does not constitute investment advice.
• CMBIGM is not liable for any losses incurred from reliance on the report.
• The report may not be reproduced or distributed without prior written consent.
• The research analyst certifies that the views expressed reflect personal opinions and are not influenced by compensation or conflicts of interest.

Summary of Recommendations

• Maintain BUY rating.
• Revised TP: HK$18.00.
• Key Drivers: Continued growth in Health and Auto segments, AI-driven efficiency, and optimized capital structure.
• Valuation: Reflects a conservative approach to investment returns and aligns with peer valuations.