NEW YORK, May 16, 2024 (GLOBE NEWSWIRE) -- Diamond Equity Research, an equity research firm with a focus on small capitalization public companies has initiated coverage of Zhibao Technology Inc. (NASDAQ: ZBAO). The in-depth 30-page initiation report includes detailed information on the Zhibao Technology Inc.’s business model, services, industry, valuation, management, and risks.
The full research report is available here. Highlights from the report include:
- Proven Business Model with a First Mover Advantage: Zhibao Technology Inc. has successfully pioneered the 2B2C ("to-business-to-customer") embedded digital insurance brokerage model in China, establishing itself as a first mover in this innovative market segment. The company's business model has not only demonstrated viability but offers a significant competitive edge. Zhibao's approach efficiently bridges insurance companies and end consumers through strategic B channels, enhancing customer reach and service delivery without the substantial costs typically associated with customer acquisition.
- Advanced PaaS Technology Platform: The backbone of Zhibao’s operations is its advanced digital insurance brokerage platform, which was launched in 2020 as the first of its kind in China. This platform integrates bespoke technology solutions that support a wide array of insurance services, from product design and customer acquisition to claims processing and data analysis. The platform's robust architecture enables seamless interaction across various digital channels, targeting operational efficiency and a superior customer experience.
- Multiple Catalysts Supporting Growth Momentum: Zhibao Technology Inc. is potentially well-positioned for sustained growth, driven by several key catalysts that could enhance its market position and operational scale. The company plans to expand its MGU services and diversify its insurance product offerings to include new products like mid-end medical and personal accident insurance, potentially broadening its customer base and revenue streams. Additionally, Zhibao aims to continuously increase its network of B channels, which could significantly amplify its market reach and customer acquisition capabilities. Further deepening engagement with direct consumers (2C) is also integral to the strategy, aiming to enhance customer retention and lifetime value through personalized services and tailored insurance solutions. Combined with ongoing technological advancements and product development, these strategic moves can potentially provide Zhibao with multiple avenues for sustained growth and market leadership in the digital insurance sector.
- International Expansion and Captive Reinsurance: Zhibao is set to expand its successful model beyond China, targeting Southeast Asia and the U.S., where digital insurance markets are nascent but promising. This international strategy is complemented by the company's plans to establish a captive reinsurance entity, enhancing its ability to manage risks and underwrite portions of its business directly. These steps are expected to strengthen Zhibao's global presence and operational resilience.
- Valuation: Zhibao Technology has cemented its leadership in China’s 2B2C embedded insurance market through cost-effective customer acquisition and advanced PaaS systems enhanced with AI and BI technologies. The company is expanding domestically and eyeing growth in Southeast Asia and the U.S., alongside developing its MGU business and potentially establishing a captive reinsurance entity. We believe that despite robust strategic initiatives aimed at expanding operations and improving efficiencies, the market may be underestimating Zhibao's potential. Our valuation analysis uses a blended approach combining discounted cash flow and comparable company analysis, resulting in an intrinsic value estimate of $7.05 per share, contingent on successful execution by the company.
- Robust Financial Performance and Strategic Growth: Zhibao Technology Inc. has shown significant financial growth, with revenues increasing by 31% to RMB 142.1 million in FY 2023, driven largely by its digital insurance brokerage segment. Despite a strategic reduction in MGU service fees to boost long-term competitiveness, overall revenue from these services remained stable. The company maintains strong profitability with gross margins above 40%, and after a temporary operating loss due to a one-time share-based compensation expense of RMB 54.7 million ($7.5 million) for issuance of ordinary shares to a related party in FY2023, it is potentially poised to return to profitability. Following a successful IPO that raised RMB 43.5 million, Zhibao has a strengthened balance sheet with a healthy cash position and manageable debt levels, supporting its capacity for future growth and market expansion.
- The Future of Insurance Distribution is Embedded: Zhibao’s 2B2C embedded digital brokerage model exemplifies the future of insurance distribution, focusing on embedded insurance that naturally integrates into customers' everyday activities via digital platforms. This approach reduces friction in the insurance buying process, increases the penetration of insurance products, and opens new avenues for customized insurance offerings.
About Zhibao Technology Inc.
Zhibao Technology Inc., through its subsidiaries, provides digital insurance brokerage services in China, and has pioneered the 2B2C ("to-business-to-customer") embedded digital insurance brokerage model, establishing itself as a first mover in this innovative market segment. It also offers Managing General Underwriter (MGU) services; and offline insurance brokerage consulting services. The company was founded in 2015 and is operationally based in Shanghai, China.
About Diamond Equity Research
Diamond Equity Research is a leading equity research and corporate access firm focused on small capitalization companies. Diamond Equity Research is an approved sell-side provider on major institutional investor platforms.
For more information, visit https://www.diamondequityresearch.com.
Disclosures:
Diamond Equity Research LLC is being compensated by Zhibao Technology Inc. for producing research materials regarding Zhibao Technology Inc. and its securities. This compensation is meant to subsidize the high cost of creating the report and monitoring the security. However, the views in the report reflect those of Diamond Equity Research. All payments are received upfront and are billed for research engagement. Diamond Equity Research LLC is being compensated by Zhibao Technology Inc. for producing research materials regarding Zhibao Technology Inc. and its securities. This compensation is meant to subsidize the high cost of creating the report and monitoring the security. However, the views in the report reflect those of Diamond Equity Research. All payments are received upfront and are billed for research engagement. As of 05/16/24, the issuer had paid us $22,500 ($22,480 after bank fees) for the initiation report and minimum of one update note (as a part of $35,000 annual contract in two six-month upfront installment payments for the first year of coverage), which commenced 04/10/24 and the second installment of $12,500 will be due by 10/10/24 for a minimum of two additional update notes. Diamond Equity Research LLC may also be compensated for non-research-related services, including presenting at Diamond Equity Research investment conferences, issuing press releases, and providing other additional services. The non-research-related service cost is dependent on the company but usually does not exceed $5,000. The issuer has not paid us for non-research-related services as of 05/16/2024. Issuers are not required to engage us for these additional services. Additional fees may have accrued since then. Although Diamond Equity Research company sponsored reports are based on publicly available information and although no investment recommendations are made within our company sponsored research reports, given the small capitalization nature of the companies we cover we have adopted an internal trading procedure around the public companies by whom we are engaged, with investors able to find such policy on our website public disclosures page. This report and press release do not consider individual circumstances and does not take into consideration individual investor preferences. Statements within this report may constitute forward-looking statements, these statements involve many risk factors and general uncertainties around the business, industry, and macroeconomic environment. Investors need to be aware of the high degree of risk in small capitalization equities, including the complete loss of their investment. Investors can find various risk factors in the initiation report and in the respective financial filings for Zhibao Technology Inc.
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