Chinese Originator Of Online Insurance – Where Stands ZhongAn?

Is the company's current share price worth buying in?


Image credit“Public access”

● ZhongAn has been trading below IPO price for years – with a huge rebound in 2021.

● The company posted its best financial results ever, but some of them are short of guaranteeing progressive trends in the near future.

● A young insurtech company, it lacks independent customer acquisition ability and public support.

● ZhongAn is a long-term 'hold'.

ZhongAn's stock (06060:HK)(ZZHGF) jumped again after years of decline, going up by 118% in 2021 – from HKD 36.2 at the very end of 2020 to HKD 78.8 on February 17.  Over the preceding years, the company had been trading below the IPO price of HKD 59.7, performing way worse than both the Hang Seng and Shanghai Composite Indexes.

Did the surge represent a reestablishment of confidence among investors?

The truth is, ZhongAn was seeing large losses ever since it had gone public, which killed the market trust. The stock price was brought even lower, to 1/3 of its IPO price, after the first half of 2019. Later on, in 2019, ZhongAn finally posted its first profit in the insurance sector, pulling back the ever-dropping price.

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In 2020, ZhongAn's profitability continued. Many pieces of evidence show that the company started to produce a harvest. Its stock gradually began to recover to the normal price range. This is fortunate news after the company spent so much money in the past three years. However, the price has yet to reach the issue price, as some concerns still abound.

Progressive financials do not guarantee stellar future performance

ZhongAn had its best year in 2019 with the first profit in the insurance segment – with this favorable trend continuing in 2020. The company posted CNY 622.1 million net income in the insurance segment in 1H2020, which significantly surpassed the figure of CNY 7.6 million for the entire year of 2019. However, the investment income increased by 254% from CNY 499 million in 2018 to over CNY 1.81 billion in 2019, which contributed most of the profit that was actually still a loss amounting to CNY 639 million. The investment income posted CNY 786 million in 1H 2020, a figure that was double net income, at a similarly high level compared to 1H 2019.

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