HUIZ.US previously announced a decent Q1 report, with a total platform premium of RMB 1.72 billion, a 38% QoQ growth, including a more than doubling of first-year premium growth; total revenue of RMB 310 million, a 31.5% QoQ growth; net income of approximately RMB 6.91 million, making a profit for six consecutive quarters.
HUIZ.US has consistently delivered steady growth in financial performance since going public, and the capital markets have always focused on performance. From the perspective of major broker research reports, institutions such as Citigroup, China International Capital Corporation and Dahua JiXian have all given the company a "buy" rating. Of these, Citigroup and Dahua JiXian have given target prices of $2.4 and $2 respectively, with potential for doubled increases compared to the current market price. It is worth mentioning that in the past three months, the company's monthly K tripled with 6%, 24%, and over 30% increases, indicating improved market sentiment and investor attention.
From a broker point of view, China International Capital Corporation pointed out that, benefiting from hot sales of dividend and annuity-related insurance policies (with first-year premiums for savings insurance policies up 77% YoY in 1Q24), HUIZ.US has to some extent resisted the negative impact of the "combination of report and audit" while being better than its previous expectations. Dahua JiXian has expressed bullishness in company performance, expecting HUIZ.US to achieve a 13.9% compound annual growth rate for net income from 2023 to 2026, driven by leading product innovation capabilities, high-quality customer base, and overseas business growth. Citigroup further mentioned the company's expansion plans overseas in their research report, particularly Hong Kong's contribution to Q1 2024 revenue, accounting for 7%, and the company's plans to enter Southeast Asian markets in the next two quarters, such as Singapore, Indonesia, the Philippines, and Vietnam.
Recently, HUIZ.US has made another substantial move in its overseas expansion. On June 20th, HUIZ.US announced the official acquisition of a Vietnamese insurtech company named Global Care.
HUIZ.US successfully entered the Hong Kong market last year, and in early 2024, the management had stated that the company will continue to expand its business in the Hong Kong insurance market, actively explore the development opportunities of the emerging insurance industry in Southeast Asian markets, replicate business models, gain more diversified market share and revenue structure, and achieve a double-digit contribution rate of international market revenue by 2024.
Clearly, HUIZ.US has a clear overseas strategic objective and implementation path, and this move in Southeast Asia further complements another piece of the puzzle in its globalization strategy.
So, what was the strategy behind HUIZ.US's move?
1. Launching overseas sub-brand Poni Insurtech and synergy with acquiring entities
From this acquisition, Global Care is a pioneering insurtech company in Vietnam specializing in digital transformation solutions for the insurance industry, providing insurance companies with simplified and digitalized sales processes, policy management, and related operational solutions.
According to the introduction, Global Care's cloud API solutions and mobile applications provide a wide range of embedded and customized insurance products to a wide customer base, including leading e-commerce platforms such as Grab and Ahamove, by connecting insurance companies with merchants and various distribution channels. In 2023, the Global Care platform facilitated 13.5 million policies, with revenue growing more than four times YoY, and registered users growing more than 1.3 million.
It is easy to see that the acquired company has shown considerable growth potential.
Through this acquisition, HUIZ.US also launched an overseas sub-brand, Poni Insurtech, and completed the subsequent acquisition through this newly established international branch. From the acquisition method, including buying existing shares and subscribing to new shares, it is completed in multiple stages. This ensures that HUIZ.US can control the acquisition pace and ensure a smooth transition.
At the same time, VinaCapital Group, the investor behind Global Care, will also obtain HUIZ.US's newly issued Class A common stock as part of the consideration through its technology investment platform, VinaCapital Ventures, accounting for approximately 1.7% of the fully diluted equity on a fully dilutive basis, with 50% of the shares subject to a one-year lock-up period. After the transaction is completed, Global Care will become a subsidiary of HUIZ.US, and its financial performance will be consolidated into HUIZ.US's financial statements.
According to historical data, VinaCapital Group's investment in Global Care can be traced back to 2021. Although the specific investment terms were not disclosed at the time, the market estimated that the transaction value was worth several million US dollars at the time. From the proportion of HUIZ.US's shares obtained by VinaCapital Group in this transaction, it seems that HUIZ.US's acquisition of Global Care is quite cost-effective.
Therefore, the acquisition of Huize has not put much pressure on capital, but has brought in a powerful local partner. As a leading investment management company in Vietnam, VinaCapital Group manages a diversified asset portfolio of $4 billion and has extensive resources and networks in the Vietnamese market. Becoming a strategic shareholder of Huize will also help Huize better integrate into the Vietnamese market, accelerate its expansion in the local market using VinaCapital Group's local advantages.
Of course, Huize's acquisition is not just about capital operations, but more importantly about the synergy of technology, brand, and market. Huize can use its technology infrastructure and AI solutions as well as its partnerships with globally leading insurance brands to accelerate the development of Global Care's new products and promote significant growth in market share. As Global Care becomes a subsidiary of Huize, the subsequent financial performance merger will also help Huize achieve its management-set target of international market revenue contribution rate, making the company's revenue sources and financial structure more diversified. Additionally, through this acquisition, Huize will establish its international brand image, and the Poni Insurtech's official entry into the Vietnamese insurance market marks a great start.
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For Huize itself, as a leading digital insurance service platform in China, choosing overseas expansion is an inevitable choice for its continuous growth in face of increasingly fierce market competition and gradual saturation of the domestic market.
From entering the Hong Kong market last year to now entering the Vietnamese market, Huize clearly sees the huge opportunities in the Southeast Asian insurance market. From the data, the insurance penetration rate in Southeast Asian countries, i.e. the proportion of premiums in GDP, is generally low, Vietnam is 3.3%, the Philippines is 1.7%, and Indonesia is 1.5%. Secondly, the potential for economic growth in Southeast Asia over the next few decades and the huge young, digital population mean that digital insurance products can more easily reach potential consumer groups, bringing opportunities for insurance technology companies to quickly occupy the market and become an ideal springboard for Huize's internationalization strategy.
In fact, insurtech has been on a steady rise in Southeast Asia in recent years. From Vietnam's Medici and Global Care, to Indonesia's Fuse and Lifepal, to Thailand's Fairdee and Singapore's Bolttech, the success of these companies demonstrates the vitality and potential of the Southeast Asian insurtech market.
Huize's acquisition of Global Care is not only a grasp of the potential of the Southeast Asian market, but also an integration of its technology and market advantages. Through the acquisition, Huize can rapidly expand its influence in the Southeast Asian market, combining Huize's successful experience in China with Global Care's existing achievements in Vietnam to further consolidate its leading position in the local digital insurance service field.
Looking ahead, once this path is successfully implemented, there is no doubt that there will be more corresponding market integration actions, and with Huize's leading advantage in the industry, its "conquest" of the Southeast Asian market will become even easier, achieving rapid penetration and occupation of the local market.
Through this layout in Vietnam, it is also clear that Huize's business model towards global "replication" and expansion is fully open. Starting with Southeast Asia, Huize replicates its digital insurance business model from the domestic market to Vietnam first, further promoting the digital transformation of the local insurance industry. Once the subsequent commercial performance is continuously realized, with the scalability and adaptability of its model, Huize is expected to steadily promote its business in more international markets and deepen its global layout.
There is reason to expect that in the future, Huize will also occupy an important position in the global insurtech field.
In conclusion, the results achieved in the first quarter demonstrate that AI capabilities have brought new opportunities to the company. With the continuous increase in the penetration rate of large models, continuous enhancement of product performance, diversification of landing scenarios, and further expansion of overseas business, Cheetah Mobile is expected to welcome a broader development space.
Finally, from the perspective of the capital market valuation level, Huize's dynamic P/E ratio is currently only 6 times, and its P/S ratio is only 0.3 times. The current valuation level partly reflects the market's deviation from its business model. With reference to its peers' P/S ratio of more than 1x and P/E ratio of 17x, Huize has only just begun to enter the valuation repair channel, and its subsequent performance still has a lot of potential.