#China #Goldman Sachs #Beijing #financial results #Waterdrop Inc.

Goldman Sachs Supports Waterdrop Inc. with a Positive Outlook

Goldman Sachs has recently reaffirmed its 'Buy' rating for Waterdrop Inc. (WDH) after the company released its impressive financial results for the fourth quarter and full year of 2024. With a newly set price target of $1.80 per American Depositary Share (ADS), Goldman Sachs highlights the positive trajectory of Waterdrop’s financial performance and market prospects.

In its report, Goldman Sachs disclosed that Waterdrop achieved a significant net profit of approximately 368 million yuan ($51 million), marking a remarkable year-over-year increase of 119.8%. This surge is particularly noteworthy as it reflects the company's successful strategies in customer acquisition and efficiency in its insurance business. The fourth quarter alone saw the insurance business's first-year premium (FYP) hitting around 1.9 billion yuan ($263 million), an increase of 24.5% compared to the previous year.

Moreover, the report reveals that Waterdrop successfully navigated operational challenges by steadily reducing losses in its non-insurance segments. To reinforce its position in the market, Waterdrop has also announced a cash dividend of $0.02 per ADS for the fourth quarter, totaling $0.04 per ADS for the fiscal year 2024, which mirrors the previous year’s dividend strategy. This consistency underscores the company’s commitment to delivering returns to its shareholders, alongside plans to maintain semi-annual dividend distributions in the future.

In terms of share buybacks, Waterdrop has proactively repurchased about 52.1 million ADSs totaling approximately $100 million since instating its buyback program in September 2021. This effort illustrates the company's confidence in its long-term value and commitment to enhancing shareholder value.

One of Waterdrop’s distinguishing features is its ambition towards technological innovation, being among the industry leaders in adopting advanced technologies such as AI and large language models (LLMs). The company allocates around 300 million yuan ($42 million) annually for research and development, which has culminated in the accumulation of over 100 technology patents. This is a testament to its commitment to innovation and excellence, with the recent introduction of the DeepSeek model contributing significant improvements to its authoritative AI-driven service capabilities.

Waterdrop's strategic focus on utilizing large AI models is twofold: kickstarting the AI Insurance Assistant initiative aimed at empowering service personnel, and enhancing the AI Insurance Expert service designed to deliver tailored insurance consulting and planning. An example of this is the deployment of Bao Xiaohui, an AI Service Assistant that operates 24/7, delivering real-time responses to enhance customer service efficiency by reducing issue escalation by 50%.

Looking ahead to fiscal year 2025, Waterdrop is projecting a revenue increase of approximately 20%, fueled by intensified investments in business expansion. Nevertheless, Goldman Sachs analysts cautioned that this aggressive growth approach could lead to increased sales and marketing expenses and may exert pressure on profit margins. Yet, a continued reduction in losses from non-insurance segments may provide a buffer against this margin pressure.

In conclusion, Waterdrop Inc.'s robust quarterly performance and strategic initiatives in innovation and shareholder engagement have captured the attention of Goldman Sachs and the financial community. As the company drives forward into the next fiscal year with ambitious growth plans, it will be interesting to see how these efforts translate into continued success in both market performance and financial returns for investors.