New Stock Preview | Revenue Improves, Stable Gross Profit, Leading White Pigeon Online in Digital Solutions for Scene Risk to Challenge Hong Kong Exchange

In recent years, the China Insurance Industry Association has released the "Fourteen-Five" Development Plan for Insurance Technology, setting development goals around the deep integration of insurance and technology, innovative applications of insurance technology, and other aspects. With the rapid development of the industry, the role of technology in driving growth has attracted increasing attention. As a significant tool to support technological innovation and spread risks for technology companies, technology insurance is increasingly gaining attention from the industry and the market, which has also attracted the interest of the capital market. According to the Hong Kong Stock Exchange, insurance technology company Pigeon Online (Xiamen) Digital Technology Co., Ltd. ("Pigeon Online") has submitted an application for listing on the main board of the Hong Kong Stock Exchange, with CMBC CAPITAL and BOC International as its joint sponsors. Amid the current high attention towards insurance technology, will Pigeon Online's debut on the Hong Kong stock market be favored by the market? Revenue Growth, Improving Gross Profit According to the prospectus, Pigeon Online is a provider of digital risk management solutions for China's scenario insurance, mainly utilizing scenario insurance as a tool to generate income through providing risk management financial services, intelligent marketing and digital solutions, and TPA services. Scenario insurance refers to products based on specific usage scenarios or activities, targeting potential risks faced in specific environments, activities, or events to provide short-term or customized protection for users. These types of insurance products are highly flexible, covering a wide range of risks in short periods but can penetrate various fragmented life scenarios, fulfilling specific protection needs in specific scenarios. Among these, scenario insurance can be divided into property insurance (guarantee insurance, engineering insurance, and cargo insurance, etc.) and personal insurance (health insurance and accident insurance, etc.). From a business model perspective, as a digital connector between insurance companies, scenario partners, and end consumers, the company closely collaborates with upstream insurance companies and downstream scenario partners in the design and customization of solutions, offering digital risk management solutions to all ecosystem participants. Currently, the company's products cover nine ecologies, including travel, health, and public services. As of now, Pigeon Online has over 302 million pieces of insured user data, data from 68 different production and life scenarios, over 200,000 claims reports, and over 8.4 billion policy records. In 2022 and 2023, the company's revenue was 405 million and 660 million respectively, representing a significant increase of 62.96% year on year. In the first nine months of 2024, the company's revenue further increased to 630 million, nearing the full-year level of 2023. From the financial data provided in the prospectus, Pigeon Online's revenue includes income from risk management financial services, intelligent marketing and digital solutions, and TPA services. Among these, revenue and percentage of revenue from risk management financial services have continued to grow in recent years. In 2022, 2023, and the first nine months of 2024 (referred to as the "reporting period"), revenue from this service was 311 million, 536 million, and 574 million respectively. The revenue contribution from this service was 77% and 81% in 2022 and 2023 respectively, reaching over 90% in the first nine months of 2024. Notably, the company's risk management financial services mainly assist insurance companies in successfully delivering insurance products they underwrite and collecting commissions from them. By assessing the situation of enterprises and the specific scenarios they face, Pigeon Online designs and submits preliminary digital risk management solution plans to partners. To address unique risks and corresponding needs of ecosystem participants in different industries, the company collaborates with over 70 major insurance companies in China to design, develop, and optimize insurance products. It is worth mentioning that the company's average commission rate has been steadily increasing, from 15.6% in 2022 to 19.8% in 2023, and further rising to 24.9% in the first nine months of 2024. As the company's second largest revenue source, revenue from intelligent marketing and digital solutions has shown stable performance, generating revenue of 86.92 million, 116 million, and 54.65 million in the reporting period. In 2024, Pigeon Online initiated the digital transformation of risk management towards large models to automate its digital solutions and began developing six MaaS business models (namely Noah's Ark, Fly Second, Smart Vision, Happy Recommendations, Smart Analysis, and Trusted Information) to increase operational efficiency and reduce decision-making costs for insurance companies and financial institutions. As the transformation deepens, the company's second growth curve is expected to open up. Benefitting from the sharp increase in revenue, the company's gross profit has also remained stable, reaching 33.51 million, 52.05 million, and 50.61 million in the reporting period. Meanwhile, the company's gross profit margin was 8.3%, 7.9%, and 8.0%, demonstrating stable performance. It is worth noting that in recent years, the company has continued to increase its investment in research and development. Pigeon Online stated that the ongoing success of its business depends on its strong digital capabilities, supporting its entire operational process and improving operational efficiency. Research and development expenditures generated by the company in the reporting period were 14.1 million, 15.7 million, and 16.5 million, accounting for 3.5%, 2.4%, and 2.6% of revenue during the same period. High growth in segmented tracks, continued fierce market competition In recent years, China's scenario insurance market has experienced sustained growth, with the market size (in terms of premium income) increasing from 51.1 billion yuan in 2019 to 79.4 billion yuan in 2023, with a compound annual growth rate of 11.6%. It is expected to further reach 130.1 billion yuan by 2028, with a compound annual growth rate of 10.4% from 2023 to 2028. Among these, digital risk management solution providers and insurance intermediaries are the main distribution channels for scenario insurance, accounting for 67% of the market share in 2023. From 2019 to 2023, the market size of scenario insurance sold through digital risk management solution providers increased from 12.2 billion yuan to 21.4 billion yuan, with a compound annual growth rate of 15.1%. Meanwhile, the market size of scenario insurance sold through insurance intermediaries increased from 21.3 billion yuan to 31.7 billion yuan, with a compound annual growth rate of 10.5%. It is estimated that in the future, the market size of scenario insurance sold through digital risk management solution providers and insurance intermediaries will continue to grow.The market demand for scenario insurance sold by risk management solution providers is expected to accelerate. By 2028, the market size of scenario insurance sold through digital risk management solution providers is expected to reach 44.8 billion RMB, with a compound annual growth rate of 15.9% from 2023 to 2028. On the other hand, the market size growth rate of scenario insurance sold through insurance intermediaries will slow down, with the compound annual growth rate from this market falling to just 6.0%.From the perspective of market competition, as a leading provider of digital risk management solutions for scenario insurance in China, White Pigeon Online holds a leading position in the market. In terms of revenue from digital risk management for scenario insurance, the company is projected to rank first among providers of digital risk management solutions for scenario insurance by 2023, with a market share of 4.4%. Additionally, in the Chinese digital insurance market, the company is also among the top tier in the industry. In terms of revenue, the company is projected to rank twelfth in the Chinese digital insurance market by 2023, with a market share of 0.3%. Among providers of digital risk management solutions, the company ranks third, with a market share of 1.8%. Overall, in the relatively niche market of digital risk management for scenario insurance, White Pigeon Online has become a pioneer in the industry. With the expansion of market demand, the company's business scale and revenue have both experienced growth. In the future, with further expansion of the company's business scope, the prospects of White Pigeon Online are worth the continued attention of investors.