Maintain a buy rating on Waterdrop Inc., with a target price of $1.9.
After Waterdrop Inc. announced its performance for the second quarter of 2024, Goldman Sachs' latest research report maintains a 'buy' rating on Waterdrop Inc. and sets a target price of $1.9 for the next 12 months.
In the second quarter of 2024, Waterdrop Inc.'s net income attributable to shareholders was 88.29 million yuan, a year-on-year increase of 306.9%, exceeding expectations by 21%. Goldman Sachs' research report pointed out that the main reason for the outperformance is the stable profitability of the insurance business and the continued reduction of losses in the non-insurance business sector. Goldman Sachs gave positive comments on Waterdrop's stable profitability and active shareholder return policy.
Regarding share buybacks, since announcing the initiation of the share repurchase program in September 2021, as of August 31, 2024, Waterdrop Inc. has cumulatively spent approximately $0.1 billion to repurchase around 49.3 million ADS shares from the open market. In addition, Waterdrop Inc. has also announced a new share repurchase program. Approved by the board of directors, Waterdrop Inc. plans to repurchase shares from the open market with a total amount not exceeding $50 million within the next 1 year.
Goldman Sachs analysts believe that Waterdrop Inc. has achieved a good balance between acquiring new customers and retaining existing ones, with the insurance business maintaining an operating profit margin of over 20%. Meanwhile, the company is working on reducing losses in the non-insurance business. Goldman Sachs expects this strategy to drive an overall increase in Waterdrop Inc.'s profit margin, hence the buy rating.