HUIZE: Why brokerages are bullish (Small Cap, Big Potential)

The post-pandemic era is offering new investment opportunities as we enter into 2021.

In particular, the capital market tends to be more intrigued as these opportunities define the new investment trend for domestic and foreign investors next year.

The latest institutional expectations offer insights that online insurance will be one of the hottest investment sectors in the year to come, especially with the increasing digitalisation of the industry compounded with consumer behaviours shifting from offline to online being a foregone conclusion.

The potential growth in the online insurance market is definitely much more attractive.

Huize listing Huize listed on Nasdaq in Feb 2020, with a price of US$10.50 per American Depositary Share (ADS). Photo: CapitalWatch

Recently, the AMTD Group, Asia's largest independent investment bank, initiated coverage on Huize with a “BUY” rating.

AMTD is optimistic about Huize, a next-generation online insurance service provider focusing on long-term health insurance, and it’s clear growth potential. Huize (NASDAQ: HUIZ) currently has a market value of USD$385 million.

More than that, many other well-known brokerages have published research reports on Huize since the beginning of 2020.

So as a small-cap company, how has Huize stood out to become the leader of the pack?

Widely known as "China's first listed insurance platform", Huize has been deeply involved in the insurance industry with a proven track record of operations of more than 14 years. And while Huize has traditionally kept a low profile, it has steadily grown and achieved outstanding performance, even while the market was grappling with the fallout from the pandemic.

In the company’s third quarter, Huize achieved a record RMB779 million in total gross written premiums, representing an increase of 41.2% compared with the same period last year.

Meanwhile, its total operating revenue in the third quarter increased by 22.9% year-on-year to RMB348 million, once again exceeding the high end of its guidance range.

It is without question that Huize has outdone itself while outperforming in the industry at the same time.

Here are some analysts' pointers:

AMTD International

Stock price	US$7.40
52-wk range	US$4.83- $14.80
Market cap	US$384.7 m
PE	--
Dividend yield	--
Shares outstanding	44.46 m

• Evolving to the next-generation, initiate a “BUY” rating with a target price of USD$10.70.

• Riding on the tide of the fast-growing health insurance segment.

• Differentiated product strategy to attract the younger generation.

• High operating efficiency boosted by its intelligent online platform.

• Independent platform to achieve win-win with small and medium-sized insurers.

Citi

• Initiate Huize at “BUY” rating with a target price of USD$10.60.

• Top pick in the insurtech sector, and a forerunner and leader in the online sales of long-term life products.

• Asset-light model which is immune to interest rate, and investment and underwriting risks.

• Unique focus on long-term health products that generate recurring fee incomes.

• Potential future vertical integration opportunities with both upstream and downstream partners.

Everbright

• Initial coverage with a “BUY” rating and a target price of USD$11.47.

• The largest insurance e-commerce platform in China with good control in selling expenses with a net profit margin that is expected to increase.

• Stable brokerage income generated from large sales of life and health insurance products.

• China's rare listed insurance brokerage with considerable accumulation of resources, such as lower traffic cost in the early stage, long-term cooperation relationships with upstream insurance companies and down-stream KOL channels, and first mover advantage in technology development.

HUIZE: Why brokerages are bullish (Small Cap, Big Potential)

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