By Thomas Kerr, CFA

NASDAQ:SDA

READ THE FULL SDA RESEARCH REPORT

2024 Financial and Operating Results

On April 28, 2025, SunCar $(SDA)$ released full year 2024 results which showed impressive revenue and EBITDA growth. Total company revenues increased 21% to $441.9 million for the full year 2024. This compares to $363.7 million in 2023.

Auto eInsurance revenue increased by 44% to $170.5 million in 2024 compared to $118.1 million for the prior year period. This growth was primarily driven by the increased number of insurance policies sold during the full year.

Auto Services revenue increased 5% to $226.5 million in 2024, from $215.0 million in 2023.

Technology Services revenue increased 46% to $44.9 million in 2024, compared to $30.7 million in 2023.

Operating costs and expenses increased to $500.3 million during 2024 from $379.2 million for 2023.

Components of the costs and expenses include:

Integrated service costs increased to $226.2 million in 2024 from $209.6 million in the prior year period.

Selling expenses increased to $22.6 million in 2024 compared to $20.6 million in 2023. This increase was primarily due to an increase in promotion expenses of $5.3 million for regional market expansion. This was partially offset by a decrease of $2.3 million for compensation for part-time sales personnel and $1.2 million for depreciation of fixed assets.

General & Administrative expenses increased from $22.5 million in 2023 to $47.0 million in 2024. This large increase was primarily due to a $31.0 million increase in share-based compensation expenses related to the 2024 Equity Incentive Plan and a $5.4 million increase in expected credit losses on account receivables.

Research and development expenses increased from $14.1 million in 2023 to $40.2 million in 2024. This was primarily due to $31.0 million of share-based compensation expense related to the 2024 Equity Incentive Plan. This one-time expense was partially offset by a decrease of $4.9 million in technology service fees due to reduced purchases of external services.

Adjusted EBITDA, which excludes certain non-recurring items and non-cash expenses, increased by 492% to $9.8 million in 2024, compared to $1.6 million in 2023. Net loss for the year was ($68.7) million or ($0.72) per share. This loss was primarily attributed to $63.5 million in stock based compensation incurred in 2024. These high levels of stock compensation are not expected to be repeated in 2025.

Zaichang Ye, Chairman and CEO of SunCar, stated, "I'm pleased with our strong 2024 results, including record revenue of $442 million and an almost 500% increase in adjusted EBITDA. These are significant milestones that reflect our business momentum. Our 100% focus on China's domestic auto market means we are largely unimpacted by geopolitical factors. This year, we have made important progress in advancing our AI cloud-enabled SaaS model, increasing our recurring revenue, and positioning SunCar for sustained and scalable growth. The continued focus of our EV partners on improving their customers' post-sale journey provides a long-term and meaningful tailwind for the business. Looking to 2025 and beyond, we remain focused on expanding our AI and software development capabilities, broadening our product offerings, and deepening our partnerships to deliver greater value for our customers and shareholders."

SunCar continues to benefit from exposure to China’s broad auto market which exceeds 300,000,000 cars. The company is not tied to new car sales and is able to take advantage of both ICE and EV vehicles that are currently on the market. The digital eInsurance offerings from the company are a very cost effective method of customer acquisition for the insurance company partners.

The company continues to secure multiple agreements with various partners to enhance both the eInsurance and auto services segments. These arrangements provide a pathway to strong double digit revenue growth in coming years.

Valuation & Estimates

We adjust our price target to $13.00 per share. Our total revenue estimate for 2025 is $535.1 million and our 2026 revenue estimate is $642.1 million. The eInsurance segment is expected to remain the company’s fastest growing business line. Our 2025 full year adjusted EPS estimate is $0.14 and for 2026, our EPS estimate is $0.35. Our Adjusted EBITDA estimate for 2025 is approximately $30.6 million.

The company announced it will begin quarterly reporting beginning for the 1^st quarter of 2025. The company also announced it will provide 2025 guidance in conjunction with the 1^st quarter earnings release.

We believe SunCar Technology Group has the potential to deliver strong double-digit revenue growth and positive earnings over the next 5-10 years as the company expands and gains market share in its eInsurance and auto service offerings. We believe the company can generate average annual revenue growth in the 15%-20% range over the next 5 years and improve margins to industry averages over time.

Our primary valuation tool utilizes a Discounted Cash Flow process. Under the scenario described above, our DCF based valuation target is approximately $13.00 per share. Our target price may be conservative as it utilizes a high discount rate of 12.0% due to the unpredictability of earnings, higher prevailing interest rates, and uncertainty surrounding revenue growth rates.

SunCar operates in a unique space in China and there are no competitors with the exact breadth of services and offerings that the company has. However, a competitive set of InsurTech, B2B marketplaces, and vertical software companies provide comps on an EV/Sales basis that show SDA stock to be undervalued on a relative basis.

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