Zhibao's Accounting U-Turn: Is This a Buy or a Sell?

Investors, buckle up. Zhibao Technology Inc. (NASDAQ: ZBAO) has just thrown a curveball with its revised H1 2024 results. Let’s dissect whether this InsurTech darling is a value play or a cautionary tale.

First, the bad news: Zhibao still posted a net loss of RMB0.6 million (USD$0.09 million) for the six months ending December 31, 2024. But here’s the twist—the loss improved by 57% compared to its earlier report. Why? Because the company discovered a major accounting error. Those tricky convertible notes and warrants? Turns out they were improperly classified as equity. Reclassifying them as liabilities sent shockwaves through the financials.

Let’s break down the math. The loss on settlement of convertible notes jumped to RMB4.4 million (USD$0.6 million), and a RMB1.4 million gain from warrant liabilities emerged. Meanwhile, net interest expense crept up slightly. All these adjustments reshaped liabilities and equity—total liabilities rose to RMB242.21 million, while shareholders’ equity dipped to RMB72.77 million.

But here’s where it gets interesting. Zhibao isn’t claiming operational success. The company explicitly states these changes are non-operational, meaning its core business—selling embedded insurance via its 2B2C model—hasn’t turned the corner yet. It partners with over 2,000 channels and serves 20 million customers, but the real question is: Can this scale profitably?

Now, the forward guidance is a doozy. Zhibao projects a 70% revenue growth for FY 2025, with improvements in gross profit and net income. If true, this would be a massive leap for an industry that’s notoriously competitive. But let’s not forget the risks. The SEC filings mention market volatility, operational challenges, and the ever-present threat of regulatory hurdles in fintech.

So, where’s the value here? The adjusted EBITDA—excluding those pesky warrant liability swings—might give a clearer picture. Investors should also look at cash flow trends and customer acquisition costs. Zhibao’s 40+ insurance solutions across travel, logistics, and e-commerce suggest a broad reach, but execution is everything.

The Bottom Line: Zhibao’s revised results are a mixed bag. The accounting corrections, while necessary, don’t mask the fact that the company’s operational turnaround isn’t yet locked in. The 70% revenue growth target is ambitious, but achievable only if Zhibao can convert its 20 million customers into profitable relationships.

Here’s the data that matters:
- Net loss improvement of 57% (but driven by accounting, not sales).
- 70% revenue growth forecast (up from what baseline?).
- RMB242.21 million in liabilities (a red flag for debt-sensitive investors).

If you’re a growth investor willing to bet on Zhibao’s InsurTech potential, the stock could be a speculative buy—especially if the sector rebounds. But income investors? Stay away. This isn’t a steady earner.

The verdict? Proceed with caution. Zhibao’s pivot from accounting errors to aggressive growth claims is bold, but execution is the only thing that matters now. Monitor those quarterly cash flow reports and keep an eye on customer retention metrics. Until then, this stock is a gamble—albeit one with a tantalizing upside.

In the end, Jim would say: “Buy the dip if you believe in Zhibao’s platform, but remember—accounting fixes don’t pay dividends!”