The stock price has fallen nearly 60% after 10 months of listing, and Shouhui Technology's adjusted net profit in 2025 is expected to decrease by 17%.

Ask AI · After adjusting net profit drops 17%, what does Handhui Technology’s earnings quality look like?

【By Yu Fan Guanjin Studio Li Limeng】

Net profit was RMB 793 million, turning from profit to loss year over year, while adjusted net profit was RMB 200 million, down 17.1% year over year. On the evening of March 25, Shenzhen Handhui Technology Group Co., Ltd., the parent company of Xiaoyu San Insurance Brokerage Co., Ltd. (02621.HK), released its 2025 annual results.

On March 26, Handhui Technology’s closing share price was HKD 3.28, which, compared with its HKD 8.08 issue price, had already cumulatively fallen by 59.41%. And this is only 10 months after its listing.

**Low “earnings quality” behind the 2025 annual results turnaround to profit** 

On the evening of March 25, Handhui Technology released its 2025 annual results. Revenue and premium both grew, and net profit turned from loss to profit. On the surface, the results appear to show a “positive” trend, but a deeper breakdown makes it clear that the “earnings quality” of this profit is extremely low, and the profitability of the core operating business actually declined.

 

Screenshot of key financial data from Handhui Technology’s 2025 annual results

Data shows that in 2025, Handhui Technology achieved operating revenue of RMB 1.47 billion, up 5.9% year over year; attributable net profit was RMB 793 million, turning from loss to profit year over year (2024 attributable net profit was -RMB 136 million); adjusted net profit was RMB 200 million, down 17.1% year over year (2024 adjusted net profit was RMB 242 million); total gross premiums reached RMB 11.2 billion, up 37%, with first-year premiums of RMB 4.5 billion, up 49.9%.

Upon closer examination, it’s not hard to see that the key driver of the turnaround to profit is not an improvement in the main business. The financial report clearly states that the main reason for the substantial improvement in net profit is “gains from changes in the carrying value of financial instruments issued to investors.” The amount of this gain in 2025 increased by about RMB 964 million compared with 2024’s change-related loss. In other words, it is a non-cash financial adjustment with no direct relationship to the company’s main operating business.

What deserves even more attention is the adjusted net profit metric. After excluding factors such as changes in the carrying value of financial instruments, Handhui Technology’s adjusted profit attributable to shareholders for 2025 was RMB 200 million, down 17.11% year over year. Core profitability is declining, not improving.

At the same time, although the company’s total gross premiums grew 37% year over year in 2025, to respond to industry policy changes and seize sales opportunities, it increased spending on commissions and channel promotion, which narrowed profit margins. The gross margin and gross margin rate of insurance transaction services fell year over year, and **in 2025, the company’s gross margin rate was about 35% (38.1% in 2024)**. This means the company’s earnings efficiency is worsening.

**The fatal blow of “report-and-pay to match”** 

For Handhui Technology, the most direct impact of the decline in adjusted profits in its 2025 annual results comes from the “report-and-pay to match” policy.

So-called “report-and-pay to match” means that the commission rates filed by insurance companies must be consistent with the commission rates actually executed; any indirect ways of exceeding the commission rate cap are strictly prohibited. “A decline in the commission rate, or an increase in commission expenses paid or channel promotion fees, may all affect the company’s operating performance.” In its prospectus, Handhui Group already admitted this risk.

Looking across the entire insurance industry, product structures have been tilting toward participating (dividend) products. In its financial report, Handhui Technology also pointed out that in 2025 the company focused on the dividend-product track to deepen its layout. However, unlike insurance companies, after receiving premium for participating life insurance, users’ premiums can be used for long-term investment to support the company’s overall operations. Handhui Technology, as an insurance intermediary, only receives commissions.

 

Revenue breakdown generated by Handhui Technology in 2025 from distributing various insurance products from insurance companies

According to the financial report, in 2025, first-year premiums for dividend-type products distributed by Handhui Technology reached RMB 1.0 billion, up 341.5% year over year, corresponding to revenue increasing by more than 200% year over year. However, in terms of commissions paid to Handhui Technology by insurance companies, overall life insurance commissions were only RMB 376 million, and its profitability was far less than that of critical illness insurance.

In addition, looking at revenue composition, although Handhui Technology has promoted a strategy of operating three major platforms in parallel—“Xiaoyu San,” “Kacha Bao,” and “Niu Bao 100”—it actually relies heavily on connecting and distributing through B-end partner channels, including self-media traffic channels (KOLs) and “Niu Bao 100” operated by licensed brokerage companies. From 2022 to 2024, the revenue share of Niu Bao 100 was 65.4%, 67.6%, and 62.8%, respectively.

Such a heavy reliance on third-party traffic channels makes the company highly vulnerable to external shocks. If B-end partner institutions lose clients, traffic costs rise, or partner institutions engage in non-compliant marketing, it will directly affect the stability of the company’s performance.

Some industry analysts say that Handhui Technology went public in Hong Kong largely because it had signed a back-to-back agreement (guarantee-and-settlement terms) with its investors. The prospectus states clearly: when Handhui Technology raised earlier financing, it signed agreements with major investment institutions such as Sequoia and Gopher Asset, agreeing that these investors would have the right to require the company to buy back their shares (i.e., “redeem the investment”). However, after the company submitted its first listing application, this right was temporarily “frozen,” with the freeze period continuing until September 30, 2025 or the 18th month after filing the application (whichever comes first). That means: if the listing fails, the company would have to come up with a large amount of money to buy back those shares, creating immense pressure. And now, in the primary market (i.e., raising funds from new investors), it basically can’t raise money. The IPO became the only way to let investors exit and satisfy the requirements of the agreement. So even if Handhui Technology knows that the valuation after listing is not ideal and the share price faces pressure, it still has to list first.

**Under a major industry reshuffle, insurance intermediaries’ “race against time to live or die”** 

The predicament faced by Handhui Technology is also a microcosm of the entire insurance intermediary industry.

In recent years, the insurance intermediary industry has been undergoing a deep reshuffle. Data from the National Financial Regulatory Administration shows that since 2025, more than 100 insurance intermediary institutions have exited the market, a figure exceeding the total number for all of last year. As of the end of 2024, the number of legal entities for insurance professional intermediaries was 2,539, down 27 from the end of 2023. This marks the 6th consecutive year of decline in the number of insurance intermediary institutions since 2019.

Behind the industry’s “ebb tide” are the combined results of multiple factors:

First, stricter regulation. In April 2025, the National Financial Regulatory Administration issued the “Notice on Promoting Further Reforms to the Individual Marketing System in the Personal Insurance Industry,” explicitly requiring the deep implementation of “report-and-pay to match,” and strengthening controls over fee budget management. This directly compresses the profit space of intermediary institutions.

Second, insurers’ “disintermediation.” More and more traditional insurance companies have built their own online platforms to sell internet insurance products directly to insurance customers. Dependence on intermediaries is decreasing.

Third, pressure on the product side. The declared interest rates for personal insurance products have continued to be lowered, making it more difficult to sell insurance products and increasing operating pressure on insurance intermediary institutions.

“This exposes some structural shortcomings of insurance intermediaries, such as the weakening of channel value and the absence of a service ecosystem, among others.” An industry analyst said. Whether these intermediaries can break away from mere “traffic dependence” and build a complete insurance ecosystem has become a challenge faced by many insurance intermediary institutions.

Looking ahead, Handhui Technology still faces significant pressure: the “report-and-pay to match” policy has been fully implemented, leaving limited room for channel commission rates to rebound; growth of self-operated platforms is weak, and the issue of reliance on third-party traffic channels is difficult to resolve in the short term; and competition among peers is intensifying, while insurers’ “disintermediation” trend continues to evolve.

Some analysts believe that Handhui Technology’s subsequent performance delivery and changes in industry policies will become key factors affecting the company’s share price trend. For investors, until there is a clear inflection point in core profitability metrics, caution may still be necessary.