20210827-招银国际-众安在线-06060.HK-1H21_UW_profitable,_Reiterate_BUY_4页_774kb

ZhongAn Online (6060 HK) Summary

Core Content

ZhongAn Online, a leading online insurer, reported strong financial performance for 1H21, with net profit rising by 54% YoY to RMB755 million, reaching 88% of the FY21E market consensus. This marks the first time the company turned underwriting profitable since its establishment, with a combined ratio of 99.4% in 1H21, improving by 4.1ppt YoY. The company's performance was driven by economies of scale and a diversified growth strategy across multiple ecosystems.

Key Financial Highlights

• Net Profit: RMB755 million in 1H21, up 54% YoY.
• Earnings Per Share (EPS): RMB1.3 in FY21E, reflecting strong growth.
• Combined Ratio: Improved to 99.4% in 1H21, below the industry average of 99.6%.
• Loss Ratio: Declined by 7.2ppt YoY to 49.4%, indicating better risk management.
• Expense Ratio: Increased by 3.1ppt YoY to 50%, due to higher commission and customer acquisition costs.
• Target Price (TP): Revised up to HK$64.00, up 4% from previous TP of HK$61.57.
• Current Price: HK$38.50, with a potential upside of +66.2% to TP.

Diversified Growth Drivers

ZhongAn Online demonstrated robust growth across various business lines, except for auto and shipping return insurance:

• Health Ecosystem: Revenue grew by 29% YoY, with a 10% increase in paid users.
• Digital Lifestyle Ecosystems: Premium growth of 52%, driven by innovative products and travel insurance recovery.
• Pet Insurance: Premiums increased over 60x YoY.
• Screen Crack Insurance: Premiums grew over 37x YoY.
• Consumer Finance: Premiums grew by 192%, despite a 30% increase in loan balance, due to higher reinsurance rates.
• Technology Business: Revenue from technology export surged by 122% YoY to RMB266 million, attributed to digital transformation in traditional financial institutions.

Underwriting Profitability

ZhongAn Online achieved underwriting profitability for the first time in 1H21, with a combined ratio of 99.4%, indicating that premiums exceeded claims and expenses. This marks a significant milestone in the company's development.

Financial Forecast (FY21E–FY23E)

Metric	FY21E	FY22E	FY23E
GWP (RMB mn)	22,307	26,554	32,683
Net Profit (RMB mn)	975	1,185	1,866
EPS (RMB)	0.7	0.8	1.3
Combined Ratio (%)	99.7	98.8	98.6
ROE (%)	6.0	6.8	9.8

Shareholding and Market Position

• Major Shareholders: Ant Group (13.54%), Tencent (10.21%), Ping An (10.21%).
• Market Cap: HK$49.018 billion.
• Stock Performance:
  • 1-month: -22.2%
  • 3-months: -16.7%
  • 6-months: -46.9%

Analyst Ratings and Recommendations

• CMBIS Rating: BUY
• Target Price: HK$64.00
• Potential Return: Over 15% over the next 12 months.

Strategic Partnerships

ZhongAn Online formed a partnership with AIA in Southeast Asia for digital marketing, enhancing its market reach and technological capabilities.

Risk and Disclaimer

The report contains forward-looking statements and is subject to market risks and uncertainties. It is not tailored to individual investors and should not be construed as an offer or solicitation to buy/sell securities. CMBIS disclaims liability for any losses incurred from reliance on the report's information.

Analyst Certification

The analyst certifies that the views expressed accurately reflect their personal views and that they have no financial interest in the companies discussed.

CMB International Securities Limited

CMBIS is a subsidiary of CMB International Capital Corporation Limited, itself a subsidiary of China Merchants Bank. The report is intended for clients and is not for public distribution.

Important Disclosures

• The report is for informational purposes only.
• It is not a recommendation for investment.
• Investors should consult with a financial advisor before making any investment decisions.
• The report may be subject to change without notice.
• CMBIS may issue other reports with differing conclusions.

Regulatory Information

• Hong Kong: Report is for intended recipients only.
• United Kingdom: Only for persons falling within Article 19(5) or Article 49(2)(a) to (d) of the Order.
• United States: Intended for "major US institutional investors" only.
• Singapore: Distributed by CMBISG, an Exempt Financial Adviser, and subject to legal responsibility as required by law.