Research Report from China Securities Co., Ltd.: First coverage gives "buy" rating to Water Drop Company. The landing of AI is expected to further release profit potential.

Recently, China Securities Co., Ltd. released a research report on Waterdrop, Inc. ADR Class A company (WDH.US). The company achieved double-digit growth in revenue and net profit attributable to the parent in the second quarter. The research report from China Securities Co., Ltd. pointed out that Waterdrop, Inc. ADR Class A has been profitable for several quarters, and the implementation of AI is expected to further unleash profit potential. The current valuation still has a certain discount, and the initial coverage gives a "buy" rating. In the second quarter of 2025, Waterdrop, Inc. ADR Class A company achieved a net revenue of 838 million yuan, with a net profit attributable to the parent of 140 million yuan, achieving profits for 14 consecutive quarters; operating expenses accounted for 38.7% of revenue, a decrease of 6.4 percentage points year-on-year. Insurance-related revenue reached 739 million yuan, a year-on-year increase of 28.7%, with first-year scale premiums reaching 3.204 billion yuan, an 80.2% year-on-year increase, and short-term and long-term insurance business growing by 95% and 45.4% respectively. Digital clinical trial business revenue showed a growth trend, with a year-on-year increase of 34.2%. 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 shares from the open market. The research report from China Securities Co., Ltd. pointed out that Waterdrop, Inc. ADR Class A company's "All in AI" strategy has been fully implemented and is reshaping the entire insurance value chain process. The AI strategy of Waterdrop, Inc. ADR Class A is not just a conceptual idea, but has achieved quantifiable results throughout the entire business process, becoming a key factor in building core competitiveness. Each year, Waterdrop, Inc. ADR Class A invests nearly 300 million yuan in technology research and development. The company has accumulated over 100 technology patents and has submitted 60 patents related to large language models, 9 of which are international patent applications. Currently, AI has been implemented throughout the entire business process of Waterdrop, Inc. ADR Class A with measurable results. In the sales and customer acquisition process, Waterdrop, Inc. ADR Class A has formed an AI-driven growth engine. Its self-developed "Waterdrop, Inc. ADR Class A Shu" AI insurance expert, with multi-modal interaction capability, has gradually matched the service efficiency of junior human agents. In the second quarter, AI insurance expert premium contributions increased by 155% compared to the previous quarter. In the service and operation scenarios, the company has launched AI customer service "Baoxiaohui", which has achieved 100% coverage of online businesses and provides round-the-clock response. In the underwriting and risk control process, the company has launched the industry's first AI underwriting expert "KEYI.AI", reducing the processing time of complex underwriting issues by 80% and achieving an underwriting accuracy rate of 99.8%. In terms of product innovation, AI and big data analysis are key to creating personalized insurance solutions. In 2024, customized products accounted for over 92% of the company's offerings, accurately covering "Blue Ocean" markets such as the elderly and those with pre-existing conditions that traditional insurance finds difficult to reach. As a leading insurance and health service technology platform in China, Waterdrop, Inc. ADR Class A has developed a "funding + insurance + pharmaceutical" three major business system over the years, with each business segment highly synergistic and mutually reinforcing. In addition, Waterdrop, Inc. ADR Class A is accelerating its exploration of overseas markets, with office locations established in Hong Kong, Singapore, and the United States. The company will continue to focus on addressing user pain points and opportunities for technological empowerment in overseas insurance markets in the future.