Broker: UOB Kay Hian
Date of Report: 09 June 2025

Huize Holding: Turning the Corner After a Challenging Quarter – International Expansion and Digital Strengths to Drive Recovery

Overview: Mixed 1Q25 Results, but a Promising Inflection Point Ahead

Huize Holding, an emerging insurance technology platform, reported weaker-than-expected results for the first quarter of 2025. Despite a non-GAAP net loss of RMB10.9 million, management remains optimistic about a near-term recovery, citing robust international growth, the normalization of insurance sales in mainland China, and ongoing efficiency gains from artificial intelligence adoption. The company maintains its previous profit guidance and reiterates a BUY recommendation, with a revised target price of US\$3.50.

Financial Highlights: 1Q25 Performance at a Glance

Key Observations from 1Q25 Results

• Huize posted a non-GAAP net loss of RMB10.9 million, falling short of expectations due to a combination of reduced gross written premiums and margin compression.
• GWP declined 16.3% year-on-year, while total revenue was down 8.5% year-on-year, mainly due to a high comparison base in 1Q24 following a buying spree ahead of a pricing rate cut.
• Brokerage income fell 9.9% year-on-year, but was cushioned by a 1.3 percentage point improvement in the blended commission rate to 18.9%.
• Other income surged 41.6% year-on-year to RMB12 million.
• Average first-year premium (FYP) policy size for long-term products jumped 58% year-on-year to RMB5,400, with persistency ratios for 13th and 25th months above 95%.
• Repeat purchase rate for long-term insurance products edged down to 38.0% from 40.2% in 2024, with 390,000 new customers added in the quarter.

Cost and Margin Trends: Margin Compression Persists

• Gross margin decreased by 3.2 percentage points year-on-year to 25.8%, as channel costs declined only 4% against an 8.5% revenue drop.
• Margin pressure was also attributed to the growing contribution of international business, which generally carries lower margins.
• Operating costs rose 1.8%, mainly due to a 7% increase in selling expenses, pushing the opex-to-income ratio up by 3 percentage points to 29.1% and resulting in an operating loss of RMB9.4 million.

International Expansion: Growth Engines Beyond Mainland China

• Vietnam operations delivered strong performance, with GWP and revenue up 35% and 34% year-on-year, respectively.
• Hong Kong insurance business continued on a growth trajectory.
• Plans are underway to launch operations in Singapore by 3Q25, pending regulatory approval and recruitment completion. Entry into the Philippines is also being explored for 2H25.
• Management remains confident of hitting its target of 30% international revenue contribution by 2026.

Insurance Sales Outlook: Signs of Recovery and Strategic Shifts

• Management believes 1Q25 marks the trough for the year, observing a notable uptick in sales momentum heading into 2Q25.
• Recovery is supported by robust international business and normalization of sales in mainland China, following the transition to participating products.
• A potential sales surge is anticipated in 3Q25 ahead of further pricing rate cuts, though incremental demand is expected to moderate due to a low return rate environment and demand frontloading in prior years.
• The company maintains its full-year profitability target with a mid-single-digit net margin, underpinned by improved sales outlook and ongoing AI-driven efficiency gains (opex-to-income ratio down 11.8 percentage points quarter-on-quarter).

Regulatory Tailwinds: Channel Commission Reform as a Catalyst

• Reform in agency channel commission expense is having a positive impact, with temporary disruptions in agency channels expected to benefit brokers like Huize in the short run.
• The company is well positioned to attract high-quality agents from insurance companies, leveraging its comprehensive product suite and digital capabilities.

Financial Forecasts and Valuation

• 2025-26 non-GAAP net profit forecasts have been revised down to RMB34.0 million and RMB36.9 million, respectively, to reflect 1Q25 results and a more conservative gross margin outlook.
• The new target price is US\$3.50 (down from US\$6.40), based on a discounted cash flow valuation (WACC: 18.1%, terminal growth: 5%), implying 0.6x 2025 P/B. The stock currently trades at a depressed 0.3x 2025 P/B with a net cash position of RMB141.7 million, representing 95% of market cap.

Balance Sheet and Liquidity Snapshot

• As of 2024, Huize had RMB294.9 million in cash and short-term investments and total assets of RMB884.2 million.
• Debt remains manageable, with short-term debt of RMB50.0 million and no long-term debt in 2024. Net debt to equity stands at -57.1% for 2024, maintaining a strong net cash position.
• Shareholders’ equity was RMB408.7 million for 2024, expected to grow to RMB524.2 million by 2027.

Company Profile and Shareholder Structure

Huize Holding is an insurance technology platform digitally connecting consumers, insurance carriers, and distribution partners through data-driven and AI-powered solutions. The company focuses on long-term life and health insurance products, targeting the mass affluent market segment.

• GICS Sector: Financials
• Bloomberg Ticker: HUIZ US
• Shares Outstanding: 10.6 million
• Market Cap: US\$20.5 million
• 52-Week High/Low: US\$10.58 / US\$1.50
• Major Shareholders: Cunjun Ma (30.9%), Crov Global Holding Limited (15.7%), Huidz Holding Limited (13.2%), Wande Weirong Limited (9.8%), CDF Capital Insurtech Limited (8.2%)
• FY25 Book Value per Share: US\$5.85
• FY25 Net Cash per Share: US\$2.12

Conclusion: A Recovery in Sight for Huize Holding

Despite a disappointing start to 2025, Huize Holding is strategically positioned for a turnaround. International expansion, increasing digitalization, AI integration, and regulatory reforms are set to bolster growth and profitability. With a robust balance sheet and renewed focus on operational efficiency, Huize offers significant upside potential for investors, as reflected in its substantial target price upside and discounted valuation metrics. The coming quarters will be crucial as sales momentum builds and new international markets come online, potentially marking a pivotal inflection point in the company’s growth narrative.