【行业研究报告】众安在线-Better profits achieved across 3 business lines

22Mar202322Mar2023CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdateZhongAn(6060HK)Betterprofitsachievedacross3businesslinesZhongAnrecordedacombinedratioof98.5%inFY22withanimprovementof1.1ptsYoY,translatingtoanincreaseof1.9ptsYoYor1.3ptsHoHin2H22.Theinsurer’sunderwriting(UW)profitgrew338%YoYtoRMB329mn,withpremiumincome+16.1%YoYatyearend.TheoutperformedUWmarginwasdrivenbylowerlossandchannelfeeratiosundertechnology-drivencostefficiencyfrombothhealthanddigitallifestyleecosystems.Revenuesfromtechnologyexportrose13.8%YoY,furthernarrowingthetotalnetloss.ZAbankdeliveredrobustrevenuegrowthreportedas106%YoY,sustainingthetop-brandingvirtualbankpositioninHK.TheGroup’snetearningsdraggedby1)RMB1.316bnreductionininvestmentincomeasaresultoftheaccountingpolicyshifttowardsHKFRS9(CMBIreport),2)RMB1.14bninvestmentincomedecreasegivenlastyearcapitalmarketvolatilities,and3)RMB556mnFXlossesonUSD-denominatedbondpayables.In2M23,wesawapick-upinpremiumsgrowthgiventhepostpandemicrecovery,whichsupportsourviewontheinsurerwithimprovedUWmarginsonbackofadvancedtechnology-drivencross-ecosystemsynergies.WeexpecttoseeaninflectionpointofprofitabilityfortechnologyexportandZABankbusinessinFY24E.ReiterateBUY.UWmarginimproved,drivenbyoutperformanceinhealthanddigitallifestyleecosystems.Thelossratiosofhealthanddigitallifestylebusinessdeclinedby2.8ptsYoYand3ptsYoYrespectively,leadingtoa2.4ptsreductioninoveralllossratioinFY22.Thechannelfeeratiosofthesetwosegmentsdecreased2.5ptsYoYand1.9ptsYoYrespectively,given7ptsincreaseinpremiumincomeofproprietarychannelscontributingtoaquarteroftotalbyendFY22.Amongwhich,premiumspercustomerrose49%YoYtoRMB755,andtheaccountofmulti-policycustomersincreasedto46%inFY22,upfrom24%inFY21reflectingenhancedcapabilitiesindirectsales.TechnologyExport&VirtualBanking:robustrevenuegrowthwithenhancedprofitability.TechnologyexportandvirtualbankingsustainedrobustrevenuegrowthinFY22,narrowingthenetlossofeachbyRMB165mnandRMB37mnrespectively.Lookingforward,wearepositiveoncontinuedgrowthwithinthesetwosegmentsgiven1)morepromisingrecurringincomecontributionfromtechnologyexport,and2)ZAbanks’betterNIMandexpandingbalancesheet.Valuation.ZhongAnisnowtradingat1.0xFY23EP/Sand1.6xFY23EP/Bagainsta5.7%ROEexpected.WeexpecttoseemarginimprovementsacrossthreemajorsegmentsinFY23E-FY25E,alongsideprofitturnaroundsofZAbankandtechnologybusinesstobeseenbyFY24E.ThesolidgrowthdrivenbyproductmixinnovationsandtechnologyintegrationwillserveasafundamentalboosterfortheCompany’slong-termsharepriceperformance.TargetPriceHK$33.82(PreviousTPHK$33.82)Up/Downside47.0%CurrentPriceHK$23.00ChinaInsuranceGigiCHEN,CFA(852)39163739gigichen@cmbi.com.hkNikaMA(852)39000805nikama@cmbi.com.hkStockDataMktCap(HK$mn)32,660.0Avg3mthst/o(HK$mn)24.152wHigh/Low(HK$)28.20/14.48TotalIssuedShares(mn)1420.0Source:FactSetShareholdingStructureAntGroup13.5%TencentComputerSystem10.2%Source:HKExSharePerformanceAbsoluteRelative1-mth1.3%8.0%3-mth13.3%12.7%6-mth10.3%5.6%Source:FactSet12-mthPricePerformanceSource:FactSetAuditor:PwCRecentreport:1.ZhongAn(6060HK)-FY22preview:2H22UWmarginimprovement(link)EarningsSummary(YE31Dec)FY20AFY21AFY22EFY23EFY24ENetprofit(RMBmn)5541,165(1,356)9091,592EPS(Reported)(RMB)0.380.79na0.621.08ConsensusEPS(RMB)n.an.a0.751.081.08Premiumincome(RMBmn)16,21518,88522,26626,16631,399Premiumincomegrowth(%)26.716.517.917.520.0Combinedratio(%)102.599.698.598.498.0P/B(x)1.71.51.71.61.5P/S(x)1.61.31.31.00.9Dividendyield(%)0.00.00.00.00.0ROE(%)3.67.2(8.5)5.79.2Source:Companydata,Bloomberg,CMBIGMestimates