Dahua Jixian research report: Maintaining a "buy" rating on Waterdrop, Inc. ADR Class A company (WDH.US) with a target price raised to $2.91.

On September 8, Dahua Jixian released the latest research report on Waterdrop, Inc. ADR Class A company (WDH.US). The report pointed out that due to strong first-year premium growth and operational efficiency improvements, Waterdrop, Inc. ADR Class A company's revenue and net profit attributable to shareholders in the second quarter increased by 23.9% and 58.7% respectively, exceeding expectations. Considering the company's robust growth momentum, management announced a new cash dividend of approximately $10.9 million, an increase of nearly 50% from the previous period, while reaffirming the 20% revenue growth target for 2025, a new goal was set for a 20% increase in net profit attributable to shareholders by 2025. Based on the analysis, Dahua Jixian raised its profit forecast for Waterdrop, Inc. ADR Class A company in 2025 and maintained a "buy" rating for the company, with a target price raised to $2.91. In the second quarter of 2025, Waterdrop, Inc. ADR Class A company achieved a net revenue of 838 million yuan, and a net profit attributable to shareholders of 140 million yuan, achieving profitability for 14 consecutive quarters; operating expenses (including sales expenses, management expenses, and research and development expenses) accounted for 38.7% of revenue, a year-on-year decrease of 6.4 percentage points. Insurance-related revenue was 739 million yuan, a year-on-year increase of 28.7%, with first-year premium reaching 3.204 billion yuan, an 80.2% increase year-on-year. Short-term and long-term insurance businesses grew by 95% and 45.4% respectively. Digital clinical trial business revenue resumed growth, increasing by 34.2% year-on-year. Since announcing the stock repurchase plan in September 2021, as of August 31, 2025, Waterdrop, Inc. ADR Class A company has repurchased approximately 55.7 million ADS (American Depositary Shares) from the public market. In this quarter, the profit margin of Waterdrop, Inc. ADR Class A company increased year-on-year, mainly due to the improvement in the profit margin of the insurance business segment, highlighting the results of AI empowering businesses to reduce costs and improve efficiency. Under the strategic direction of "All in AI," Waterdrop, Inc. ADR Class A empowers the insurance business with AI large models, covering core processes such as underwriting, customer service, quality inspection, product innovation, sales, and marketing. The premium contribution of AI medical insurance expert increased by 155% month-on-month. In the customer service scenario, AI customer service "Bao Xiaohui" has achieved 100% user coverage, with AI solving rate exceeding 95.5% in product service scenarios; in the underwriting field, Waterdrop, Inc. ADR Class A company has launched the industry's first AI underwriting expert "KEYI.AI," with an underwriting accuracy rate of 99.8% and response speed improved by 260 times; in the quality inspection process, 100% full-scenario coverage is achieved through the "AI large model insurance quality inspection solution," with costs reduced by over 50% compared to manual mode. Furthermore, Waterdrop, Inc. ADR Class A company is also accelerating its exploration of overseas markets. Management pointed out that the company is in the early stages of exploring overseas markets and has already started insurance operations in the Hong Kong region. Over the past two years, a mature and complete insurance brokerage service system and cooperation network have been established in Hong Kong. The company will also learn from its mainland business experience to explore innovative points in product and operational aspects. Looking ahead, Waterdrop, Inc. ADR Class A will further develop its international business, continuously focus on user pain points and technology empowerment opportunities in overseas insurance markets. Based on mature business judgment, the company will actively explore more innovative overseas businesses. Dahua Jixian's analysis believes that strong performance, increased profit expectations, and steady shareholder returns will enhance investors' confidence in Waterdrop, Inc. ADR Class A company and drive a reevaluation of its valuation. At the same time, Dahua Jixian also raised profit expectations for Waterdrop, Inc. ADR Class A company from 2025 to 2027 to reflect the enhanced profitability brought by AI efficiency and rapid premium growth.