Recently, Goldman Sachs released a research report stating that it will maintain the “buy” rating of Water Drop (WDH.US) and raise the target price for 12 months to 3.5 US dollars. Shuidi's net profit of 608 million yuan in 2022 exceeded expectations, and Goldman Sachs expects Water Drop to maintain overall profitability in 2023.

According to Goldman Sachs's research report, over the past 18 months (since the third quarter of 2021), Shuidi's financial performance has improved significantly. Net profit has been positive for 4 consecutive quarters, and cash balances (including cash equivalents and short-term investments) have continued to accumulate. Furthermore, Shuidi's non-current contract assets continue to improve, which shows that Shuidi's transformation to long-term insurance products has achieved certain results.

During the 2022 earnings call, Shuidi's management stated that the focus for 2023 will be more focused on investing in growth opportunities. The research report analyzed that in the short term, this may mean that Shuidi's customer acquisition costs may increase to achieve the company's target of at least 15% year-on-year revenue growth in 2023. At the same time, investments in growth opportunities may also include collaboration with value chain partners, more R&D costs, and potential mergers and acquisitions in the healthcare ecosystem.

According to Goldman Sachs's research report, the direction of Shuidi's continued investment is: 1. Expanding its offline insurance brokerage business, because sales of long-term insurance policies usually require more contact with customers compared to pure online insurance product sales; 2. In the direction of the healthcare ecosystem, it obtains more service capabilities through investment or mergers and acquisitions.

In terms of medical business, Shuidi accurately linked pharmaceutical companies with patients, and digital clinical trial solutions achieved strong growth in 2022. Goldman Sachs Research reports that this is an example of Shuidi generating additional revenue at a relatively small incremental cost through its own accumulated resources. If Shuidi can continue to commercialize these unique resources, it may have a positive impact on long-term profits.

In the long run, Goldman Sachs Research reports that in terms of insurance brokerage business, Shuidi needs to further shift its product portfolio to long-term insurance products to maintain sustainable profits.