ZA ONLINE (06060) is currently trading at 1.1x 2025e P/B. CICC maintains its outperform industry rating for the company and has raised its 2025/2026e earnings per share forecasts by +12.3%/+13.1% to HK$0.73/0.83, driven by better-than-expected virtual bank profitability trends and underwriting improvements. The firm has also raised its 2025/2026e book value per share by +16.5%/+16.3% to HK$15.23/16.06, corresponding to a 9.5% increase in target price to HK$23, representing 1.4x 2025e P/B and 22.5% potential upside.

CICC's key observations are as follows:

**1H25 Profit Exceeded Expectations**

ZA ONLINE announced its 1H25 results, with total premium income up 9% year-on-year and combined cost ratio (CoR) improving by 2.3 percentage points year-on-year to 95.6%, outperforming expectations mainly due to better-than-expected underwriting performance in health and consumer finance segments. Net profit attributable to shareholders surged 1103.5% year-on-year to RMB 668 million, exceeding expectations primarily due to better-than-expected underwriting profits and ZA Bank's profitability improvements.

**Significant Year-on-Year Underwriting Improvements**

ZA ONLINE's property and casualty insurance premiums increased 9% year-on-year to RMB 16.66 billion in 1H25, mainly driven by health (+38% YoY) and auto (+34% YoY) ecosystems, while the consumer finance ecosystem (+24% YoY) also showed significant recovery. CoR improved by 2.3 percentage points year-on-year to 95.6%, with health/digital lifestyle/consumer finance/auto ecosystem CoRs at 92.9%/99.9%/94.0%/91.2% respectively. Underwriting profit surged 109% year-on-year to RMB 656 million.

**Technology Business Reduces Losses, Virtual Bank Turns Profitable; Focus on Stablecoin-Related Business Progress**

The company's technology output business generated total revenue of RMB 496 million in 1H25 (excluding shareholding ratio impact), up 12.2% year-on-year. Hong Kong virtual bank ZA Bank's net income increased 82.1% year-on-year to HK$457 million, with cost-to-income ratio improving by 52 percentage points year-on-year to 67%, turning profitable with net profit of HK$49 million. The firm suggests monitoring Hong Kong stablecoin-related developments and their potential boost to ZA Bank's future financial performance.

**Stable Investment Performance, High Net Profit Growth**

ZA ONLINE's domestic insurance net/total investment yields were 2.1%/3.3% respectively in 1H25, with improvements in foreign exchange gains/losses and financial expenses. Driven by underwriting, investment, and technology businesses collectively, the company's 1H25 net profit increased 1103.5% year-on-year to RMB 668 million, exceeding expectations.

**Health and Auto Ecosystems May Welcome Important Development Opportunities; Reiterate Recommendation**

1) The firm is optimistic about ZA ONLINE's health insurance product innovation and operational capabilities. Against the backdrop of medical insurance reform, the company's health ecosystem is expected to welcome important long-term development opportunities.

2) Considering regulatory control over auto insurance fee competition and the company's quality-focused operational approach, as well as development trends in new energy vehicle insurance and internet auto insurance, the firm expects ZA ONLINE's auto insurance to achieve both profitability and scale growth, providing growth space for future underwriting profits.