On December 6, Waterdrop Inc. (WDH.US) released its results for the third quarter of 2022, reporting that the company achieved operating income of 772 million yuan, an increase of 10.1% over the previous quarter, and a net profit of 170 million yuan. CLSA released a research report that Waterdrop Inc. 's third-quarter results were better than expected and gave a "outperform" rating.
As of December 8, Beijing time, Waterdrop Inc. 's latest closing price was US $2.08, up 45.65% year-to-date. According to CLSA, Waterdrop Inc. 's cash equivalents and short-term investments already account for 70% of its current market capitalization, and the company's share price is still low.
According to Waterdrop Inc. 's financial report, the company has continued its effective cost control ability, with sales and marketing expenses falling by 82.4% in the third quarter compared with the same period last year, and operating costs and expenses by 50.5% compared with the same period last year. CLSA believes that Waterdrop Inc. has made profits for three consecutive quarters after adjusting his business model and cutting expenses, proving that he has achieved a stable and controllable profit income.
CLSA analysis, Waterdrop Inc. 's net profit is expected to exceed the previous management performance guidance expectations. Data show that the first-year premium of Waterdrop Inc. 's insurance business reached 1.785 billion yuan in the third quarter, up 8% from the previous quarter, while the rate of return rose by more than 20 percentage points.
CLSA believes that, taking into account macro factors, Waterdrop Inc. 's current priority is to maximize the return on investment rather than expand its scale. The above data have shown that despite the challenging environment, Waterdrop Inc. has continued to generate net profit in recent quarters, and the company's cost control has been effective.
CLSA raised its target share price of Waterdrop Inc. to $2.40 from $1.86. based on the current low price-to-book ratio and price-to-earnings ratio, as well as an increasingly relaxed external regulatory environment, CLSA expects Waterdrop Inc. 's share price to be at a low level. and downside risks are limited.