U-BX Technology Needs to Work on its Business Model

I’m publishing this series to discuss a topic that I follow closely - cloud stocks, trends, strategy, acquisitions, and more. Please subscribe to my Cloud Stock Analysis series to never miss an article.

Earlier this year, Chinese insurance tech solutions provider U-BX Technology (Nasdaq : UBXG) listed in the US. The company has had a disappointing run so far.

U-BX’s Offerings

Beijing, China-based U-BX was set up in 2018 with a focus on providing value-added services to businesses within the property and auto insurance industry in China. The company leverages AI capabilities to serve insurance carriers and brokers through three main products. Its digital promotion services help its institutional clients gain visibility on social media platforms.

It offers risk assessment services through a smart algorithm called the Magic Mirror that generates individualized risk reports. Magic Mirror calculates payout risks for auto insurance coverage based on vehicle information such as the vehicle brand, model, area that the vehicle is used in, and its age. Magic Mirror utilizes AI and optical character recognition technology to produce detailed risk assessment reports that include accident likelihood, potential claims, and estimated settlement amounts that are sold to insurance carriers.

Finally, it offers value-added bundled benefits that help major insurance carriers or brokers expand their customer reach by providing benefits such as auto maintenance plans or parking notifications to its customers for low or no cost.

U-BX’s products have been received well in China. It has over 300 city-level property and auto insurance carriers nationwide, and more than 200,000 insurance brokers as its customers. As AI capabilities continue to improve within the insurance industry, U-BX is hopeful that it will also expand its reach within the overall insurance industry.

U-BX’s Financials

For its digital promotion business, U-BX earns revenues by charging its customers a fee based on consumers’ clicks, views or promotion time through social media channels. It also earns revenues based on the number of assessment reports that it provides to the insurance carriers through its risk assessment services. It does not break out the revenues by the nature of services it provides. For the year ended June 2023, the company reported revenues of $94.3 million, compared with $86.7 million a year ago. It ended the year with a net income of $0.16M compared with a loss of $0.06M a year ago.

U-BX has a big market opportunity ahead, but it is a very small player in the space right now. According to a market report, China’s market for general insurance is expected to be reach $313 billion by 2025. Analysts are not too pleased with its low margin business. U-BX has become profitable, but the margins are very meager at less than a percent.

Earlier this year, U-BX went public when it raised $10 million by pricing its listing at $5 a share. A few years ago, in 2022, U-BX had also announced plans to go public by wanting to raise $30 million. It reduced the size of its listing when it finally went public in April. The stock has not had a strong run so far. It is currently trading at $0.68 with a market capitalization of $18.9 million.  

Ten years ago, Chinese e-commerce player Alibaba had listed on the US exchange raising $25 billion. That was the biggest listing ever at that time. But things have died down since then for Chinese tech companies due to strained political relationships between the US and China. Listings have also slowed down because the Chinese government itself has exercised stricter control over private companies. Chinese companies are also avoiding the US markets because of the fear of the scrutiny that a US listing entails. A few years ago, Chinese ride sharing app Didi listed on the NYSE. Within six months though, it had to delist because of increased review by Chinese authorities who were concerned that Didi would be expected to transfer data about Chinese people to the United States.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.

Looking For Some Hands-On Advice?

If you’re looking to work with Sramana Mitra in private, please check 1-on-1 Consulting. If you are comfortable discussing in public, you can also come to our Free Public Roundtables.

Photo Credit: Sasin Tipchai from Pixabay