Original title: CITIC Leon: Give Shuidi Company a Purchase Rating Target Price of $15.80 Source: Financial Industry Network
CITIC Lyon released a research report on the 1st, giving Shuidi a “buy” rating. Based on a compound growth rate of 47% in 2020-2025, the target price is 15.8 US dollars. Meanwhile, according to US GAAP, CITIC Lyon expects Water Drop to be profitable in 2023.
CITIC Leon believes in a research report that as the second largest online life insurance and health insurance distributor, Shuidi will be in an advantageous position in the online life insurance and health insurance boom. “As a newly listed company, Water Drop provided a scarce investment opportunity. With mature brand awareness, excellent customer acquisition capabilities and technical empowerment, Shuidi has good investment opportunities in the Chinese insurance technology sector.”
Since its listing, Shuidi's stock price has dropped by about 31%, while MSCI China's stock price was 3% during the same period. CITIC Leon believes this shows that the market is not fully aware of the online life insurance and health insurance business models and the potential long-term synergies brought about by “insurance+healthcare.”
Water Drop's revenue engine is its insurance market. Water Drop earns brokerage commissions by distributing 200 life and health insurance products to clients. CITIC Lyon expects that during the period 2020-25, Shuidi will expand its customer base, shift its product structure to long-term products, and increase its profitability. Meanwhile, in terms of insurtech, Shuidi will actively use its data insight and technology to improve operational efficiency and add value to customers, seizing the 10 trillion yuan insurtech market.
CITIC Leon predicts that according to US GAAP, Shuidi is likely to achieve profit in 2023, while the target price of $15.80 means 5.2 times P/S in 2022, in line with global insurtech peers.
Looking forward to the future, CITIC Leon believes that the goal of Shuidi is to enter the healthcare ecosystem. Although its healthcare business is still in its infancy, it only provides basic medical services, online consultations, and small-scale drug benefits. Another bigger idea for Water Drop is the export and commercialization of data and insurance technology.