Goldman Sachs Maintains 'Buy' Rating for Waterdrop with Price Target of US$1.80

, /PRNewswire/ -- Following the release of Waterdrop Inc.'s (WDH) fourth-quarter and full-year 2024 financial results, Goldman Sachs' latest research report maintains a "Buy" rating for Waterdrop and sets a 12-month price target of US$1.80 per ADS.

According to Goldman Sachs' report, Waterdrop achieved a higher-than-expected net profit attributable to shareholders of 368 million yuan (approx. US$51 million) for the full year of 2024, representing a year-on-year increase of 119.8%. In the fourth quarter of 2024, the first-year premium (FYP) for the insurance business reached approximately 1.9 billion yuan (approx. US$263 million), up 24.5% year-on-year, primarily driven by improved customer acquisition efficiency in short-term insurance products. Additionally, losses in the non-insurance segment continued to narrow during the quarter.

In its fourth-quarter and full-year 2024 earnings report, Waterdrop announced a cash dividend of US$ 0.02 per ADS, bringing the total dividend for fiscal year 2024 to US$ 0.04 per ADS (consistent with 2023). Given the stability of its operations, the company plans to distribute cash dividends on a semi-annual basis going forward.

Regarding share buyback, since the announcement of its share buyback program in September 2021, Waterdrop had repurchased approximately 52.1 million ADSs (American Depositary Shares) from the open market as of the end of February 2025, totaling approximately US$100 million.

As one of the first companies in the industry to adopt AI LLMs, Waterdrop has consistently driven innovation through technology since its inception, investing approximately 300 million yuan (approx. US$42 million) annually in research and development. The company has accumulated over 100 technology patents and built a comprehensive LLM application system covering all insurance scenarios. Recently, Waterdrop introduced the DeepSeek model, significantly enhancing its AI-driven service capabilities in market segments.

Waterdrop's application of large models focuses on two main areas: launching AI Insurance Assistant to empower insurance service personnel; and upgrading the AI Insurance Expert to provide users with insurance consultation and planning services. For example, the company has releases Bao Xiaohui, an AI Service Assistant which is available 24/7 to provide responses in real time, reducing issue escalation and improving service efficiency by some 50%.

Looking ahead to fiscal 2025, Waterdrop foresees revenue growth of approximately 20%, with increased investment in business expansion. Goldman Sachs analysts believe this may lead to higher sales and marketing expenses, potentially putting downward pressure on the company's profit margins. However, the reduction in losses from non-insurance segments could partially offset this pressure.