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On Monday, Citi analysts downgraded Huize stock (NASDAQ:HUIZ) from Buy to Neutral and reduced the price target to $2.30 from $7.20. The decision follows Huize’s reported net loss of RMB8.6 million in the first quarter of 2025, mainly due to margin erosion linked to its overseas expansion efforts. According to InvestingPro data, the stock is currently trading at a significant discount to its Fair Value, with shares down over 66% in the past six months.
In the first quarter, Huize experienced a 10% year-over-year decrease in brokerage income, driven by a 16% contraction in gross premiums facilitated. Despite this, the blended commission rate rose by 1.3 percentage points year-over-year to 18.9%. The cost of revenue decreased by 4% to RMB210 million, but the gross margin narrowed by 3.2 percentage points to 25.8%, leading to a 19% decline in gross profit to RMB73.3 million. InvestingPro’s analysis shows the company’s overall financial health score as weak, with particularly concerning cash flow metrics.
Selling expenses increased by 7% year-over-year in the first quarter, primarily due to higher marketing expenses. Meanwhile, general and administrative, as well as research and development expenses, decreased by 3% and 6% year-over-year, respectively. Earnings shifted from a net profit of RMB6.9 million in the first quarter of 2024 to a net loss of RMB8.6 million in the same period of 2025.
Huize management indicated plans to expand into Singapore in the third quarter of 2025 and the Philippines in the second half of 2025. Citi analysts cited the unfavorable geographic shift as a factor that may continue to pressure business margins, prompting the downgrade to Neutral/High Risk and the price target reduction. Despite current challenges, InvestingPro analysis suggests potential improvement ahead, with analysts expecting the company to return to profitability this year. Discover 10+ additional exclusive ProTips and comprehensive analysis in the Pro Research Report, available with an InvestingPro subscription.
In other recent news, Huize Holding Ltd reported a 4.5% year-over-year increase in total revenue for the fourth quarter of 2024, reaching RMB 1.25 billion. The company also saw a 31% rise in first-year premiums, highlighting strong customer acquisition efforts. Despite these positive financial results, the stock experienced a decline, reflecting investor concerns about future profitability and regulatory challenges. Huize is focusing on expanding its international presence, aiming for 30% of its revenue to come from overseas markets by 2026, and is integrating AI technology to enhance operational efficiency. The company successfully acquired Vietnam’s GlobalCare, which saw a 32% increase in total policies issued in Q4, with revenue growing by 33% sequentially. Analysts have noted that the regulatory environment might consolidate market share among top players like Huize, potentially leading to a healthier competitive landscape. Additionally, Huize’s international arm, Honey InchiTech, continues to drive growth, contributing significantly to the company’s revenue. The firm plans to further expand into Singapore and the Philippines in the near future.
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