20250324-招银国际-众安在线-06060.HK-Tech_export_out_of_the_red__ZA_Bank_on_track_for_breakeven_7页_937kb

ZhongAn (6060 HK) Summary

Core Content

ZhongAn has reported improved financial performance in FY24, with a significant increase in net profit and progress in turning around the tech export segment and reducing losses in ZA Bank. The company's overall earnings beat expectations, and the report highlights its strategic focus on leveraging the domestic AI trend to enhance its Insur-Tech offerings and drive valuation upside.

Main Points

• Net Profit Growth: ZhongAn's net profit in FY24 reached RMB 603 million, a 105% increase year-over-year. This outperformed estimates and Bloomberg consensus, excluding the one-off gain from the disposal of Zhong An International in FY23.

• Tech Export Turnaround: The tech export segment achieved a net profit of RMB 77.6 million in FY24, a stark improvement from a net loss of RMB 468 million in FY23. This is attributed to higher gains from associates and JVs, increased net investment income, and other income. The segment is expected to grow its profit at a 40% CAGR over the next three years due to IFRS17 transitions and economies of scale.

• ZA Bank Performance: ZA Bank's net loss narrowed to HK$232 million in FY24, down by HK$167 million YoY. The bank is expected to turn a profit in FY25E, with a projected slim profit of HK$0.8 million. This is driven by a higher net interest margin, increased loan balance, and improved cost-to-income ratio.

• Combined Ratio (CoR): The overall CoR rose to 96.9% in FY24, up 1.7% YoY. The loss ratio increased to 58.3%, while the expense ratio rose slightly to 38.6%. The report notes that the CoR for the health segment increased significantly, while the consumer finance segment saw a notable decrease.

• Valuation Methodology: The report has shifted from a P/B-ROE model to a Sum-of-the-Parts (SOTP) approach to better reflect the contributions of the tech export and banking segments. The new price target is HK$16.0, implying a 1.0x FY25E P/B and 23.0x FY25E P/E.

• Earnings Forecast: The forecast for FY25E-27E indicates a steady increase in net profit, with the EPS rising from RMB0.63 to RMB0.87. The report expects the tech export segment to grow rapidly, contributing to the company's earnings diversification.

• Key Risks: Prolonged low interest rates, increased equity market volatility, potential deterioration in underwriting CoR, and lower-than-expected profits from the tech export and banking segments are highlighted as key risks.

Financial Highlights

Earnings Summary

Valuation

Shareholding Structure

• Ant Group Co., Ltd.: 10.7%
• Tencent Holdings Limited: 8.1%

Key Metrics

Analyst Ratings

• CMBIGM Rating: BUY
• Target Price (HK$): 16.0
• Upside: 18.5%

Summary

ZhongAn has demonstrated significant progress in FY24, with net profit more than doubling and the tech export segment turning from a loss to a profit. The company is on track for ZA Bank to achieve breakeven in FY25E, which is expected to be a key catalyst for valuation upside. The SOTP valuation method is adopted, projecting a fair value of HK$16.0 for the stock. The report maintains a BUY rating, with the new target price reflecting a 1.0x FY25E P/B and 23x FY25E P/E. The company is expected to benefit from the domestic AI trend and IFRS17 transitions, with the tech export segment projected to grow at a 40% CAGR over the next three years. Key risks include prolonged low interest rates and market volatility.