Zhi Tong Cai Jing·2025-08-21 02:19Core Viewpoint - ZhongAn Online (06060) is currently trading at 1.1x 2025e P/B, with an outperform rating maintained due to better-than-expected trends in virtual banking profitability and underwriting improvements, leading to upward revisions in earnings forecasts for 2025/2026 by 12.3% and 13.1% to HKD 0.73 and HKD 0.83 respectively, and book value estimates by 16.5% and 16.3% to HKD 15.23 and HKD 16.06 respectively, resulting in a target price increase of 9.5% to HKD 23, implying a 1.4x 2025e P/B and a 22.5% potential upside [1] Group 1: Financial Performance - In 1H25, ZhongAn Online reported total premium income growth of 9% year-on-year, with a combined cost ratio (CoR) improvement of 2.3 percentage points to 95.6%, driven by better-than-expected performance in health and consumer finance underwriting; net profit attributable to shareholders surged by 1103.5% to RMB 668 million, exceeding expectations due to underwriting profitability and improved performance from ZhongAn Bank [2] - The underwriting performance showed significant improvement, with property and casualty insurance premiums increasing by 9% to RMB 16.66 billion, primarily driven by health (up 38%), automotive (up 34%), and a notable recovery in consumer finance (up 24%); CoR improved by 2.3 percentage points to 95.6%, with underwriting profit growing by 109% to RMB 656 million [3] Group 2: Business Segments - The technology business reported a revenue of RMB 496 million in 1H25, a year-on-year increase of 12.2%; the Hong Kong virtual bank, ZA Bank, saw net income growth of 82.1% to HKD 457 million, with a cost-to-income ratio improving by 52 percentage points to 67%, achieving profitability with a net profit of HKD 49 million; attention is drawn to the developments in stablecoin-related businesses in Hong Kong and their potential positive impact on ZhongAn Bank's future financial performance [4] - Investment performance remained stable, with net and total investment returns of 2.1% and 3.3% respectively in 1H25, alongside improvements in foreign exchange gains and financial expenses, contributing to a net profit increase of 1103.5% to RMB 668 million, surpassing expectations [5] Group 3: Future Opportunities - The company is optimistic about the long-term development opportunities in the health insurance sector, driven by product innovation and operational capabilities amid healthcare reforms; the company’s automotive insurance is also expected to achieve both profitability and scale growth, supported by regulatory controls on pricing competition and trends in new energy and internet-based insurance [6]