OneConnect's Restructuring Risks: High Cash Burn and Lack of Profitability

OneConnect Financial Technology (NYSE:OCFT) stock is a hold due to high risk in restructuring execution, high cash burn, and lack of profitability. The company operates at a loss and its next quarters will be critical in determining its future prospects.

OneConnect Financial Technology (NYSE:OCFT) stock is currently a hold due to high risk in restructuring execution, high cash burn, and lack of profitability. The company operates at a loss, and the next quarters will be critical in determining its future prospects.

OneConnect Financial Technology is a Technology as a Service (TaaS) provider, operating mostly in China for financial institutions with a growing ambition for global expansion. The company’s main shareholder, Ping An Group (OTCPK:PNGAY), is also one of its largest clients. This association offers both positive and negative points for OCFT: it gains credibility in the market but also creates dependence on PNGAY. Revenue from Ping An and Lufax fell by 59%, directly affecting the company's total revenue [1].

OneConnect went through a restructuring where it eliminated 99.6% of its cloud platform revenue, representing an implicit admission that the previous business model was unsustainable. The company focused on three main segments: Digital Banking, Digital Insurance, and Gamma Platform. Despite the decline in Digital Banking due to macroeconomic issues, Digital Insurance showed a positive growth of 11.2%, indicating its potential as the most promising segment [1].

At the end of August, the company reported its results for the first half of 2025 under its new model. Its revenue from continuing operations was approximately $112 million, a 43.4% decrease compared to last year. The company's gross margin compressed to 26.1% from 37.1% in the same period last year, reflecting the loss of scale. The Digital Insurance segment grew 11.2%, demonstrating strength in the company's new strategic focus area [1].

The company operates in the Fintech as a Service (FaaS) market, which is undergoing rapid expansion and growth. On a global scale, this market was valued at $417 billion in 2025, with growth rates between 14% to 16.3% until 2035, expected to pass $1 trillion. In the Asia-Pacific, China is the main driver of this market, valued at $4.59 trillion in 2024, with projections for its value to double by 2030, reaching almost $10 trillion [1].

The trends in the Chinese Fintech market involve digitalization, driven by payment apps that create a base for active consumers in the digital environment. OCFT is well-positioned to capture these trends, with its insurtech segment showing higher growth in the latest results [1].

Competition in the market is fierce, with large companies like Alibaba and Tencent already strong and established. OneConnect's strategy of selling its technologies to banks and insurers is an attempt to position itself as a facilitator, with its success depending on the willingness of these institutions to invest in competitive technologies [1].

OneConnect generates revenues through a B2B model, offering services to companies in the financial niche. Its revenue streams come from fees, separated into Implementation and Transaction. The projection for Transaction Revenue is negatively impacted by the failure in the expansion strategy and the continuous reduction in spending by client companies [1].

The company's EBITDA is currently at -$23.13, indicating inefficiency in generating profits. Historically, the EBITDA has always been negative, a characteristic present since it became public. The company always focused on accelerated growth, investing heavily in R&D, sales, and marketing, which kept it at an operating loss for many years [1].

The EV/EBITDA is negative at -3.26x, and the P/S multiple is 1.16x. Using this metric and the revenue projection for the next 12 months of $230.2 million, its stock and its Market Cap will show a decrease of 5.86%, with the price per share starting from $7.21 currently, reaching [1].

References:
[1] https://seekingalpha.com/article/4820093-oneconnect-the-new-business-model