Although equity market volatility was quite high in 4Q23, we noted that Noah reported large increase in net profit 4Q23, mainly due to relatively low comparison base in 4Q22 and rapid expansion in overseas business. As a result, its adjusted net profit increased 56.7% YoY in 4Q23 and 1% YoY in 2023, against 8.7% YoY decrease in 9M23. Despite high volatility in domestic equity markets, Noah's AUM was relatively stable in 4Q23, mainly thanks to rapid expansion in overseas business, further reflecting its strong competitiveness in the wealth management industry. In our view, its overseas net revenue and AUM may continue to report decent growth in 2024.
Key Factors for Rating
Overseas business increased rapidly in 2023. Its number of overseas active clients may increase 44.6% YoY in 4Q23 and 38% YoY in 2023. Its overseas net revenue may surge 73% YoY and account for about 43.5% of its total net revenue in 2023, up from 26.7% in 2022.
Overseas AUM may expand decently in 2023. We expect its overseas AUM to increase 7.6% YoY in 4Q23 and account for about 23.3% of total AUM as of end December 2023, up from 20.8% as of end December 2022. Its AUM reached RMB154.6bn at end December 2023, against RMB157.1bn as of end December 2022.
Dividend payout ratio will increase. Noah announced a 50% dividend payout ratio and a 50% special dividend payout ratio, which will result in about 20% dividend yield for full year 2023 and should bode well for its shareholders' interests. In our view, Noah will maintain its competitiveness in China's wealth and asset management market in the next few years.
Key Risks for Rating
Noah might be negatively affected by rising volatility in the equity markets; risk events in investments such as Camsing incident may negatively affect Noah's value and brand image.
Valuation
We noted Chinese equity markets sentiments has improved in recent months. Meanwhile, its overseas business may continue to report decent growth in the near future. Meanwhile, Noah announced generous dividend payout for full year 2023, thanks to its healthy balance sheet. Noah is now trading at 4.4x 2024E adjusted P/E, which is undervalued. We revised up our target price from US$22.5 to US$23.91, based on 10.1x 2024E adjusted P/E, at about 20% discount to its average forward P/E over the past ten years. Maintain BUY rating.