Oppenheimer Comments On CNinsure Following Earnings Disappointment; Lowers PT

CNinsure's CISG the 20-23% net income growth guidance for 1Q11 was a shock to the Street, as it fell well below the past 30%+ growth trend. However, Oppenheimer thinks CISG's focus on organic growth could increase the transparency of the story, potentially easing the Street's concerns on the acquisition front. The stock may still face selling pressure in the near term as the Street awaits investment guidance on CISG's e-commerce insurance platform. A ramp-up of the e-commerce platform will create margin improvement opportunities, driving renewed growth opportunity from 2012. Valuation still appears attractive to us, trading at 8.3x our Street-low 2011E EPS ex-cash. Lowering Oppenheimer's PT to $20 from $23, assuming a PEG valuation of 0.8 ex-cash, but maintains an Outperform rating. Oppenheimer estimates CISG could incur a RMB80-120M annual investment in building its e-commerce insurance system. The revised model assumes CISG's e-commerce system to generate profit in 2013 and 2011-2013 related revenue of RMB10M, RMB50M and RMB125M. Consensus needs to come down further. CISG closed Wednesday at $15.92