UOB Kay Hian
Date of Report: Monday, 08 September 2025
Waterdrop Inc Delivers Robust Q2 2025 Results: Accelerating Growth, AI-Driven Efficiency, and Enhanced Shareholder Returns

Executive Summary: Waterdrop Inc Surges with Record Earnings, Tech Innovation, and Shareholder Rewards

Waterdrop Inc, a leading insurtech platform headquartered in China, has reported a stellar Q2 2025, surpassing analysts’ estimates on both top and bottom lines. The company’s robust financial performance is underpinned by accelerated revenue growth, margin expansion via AI integration, and higher returns for shareholders. Management’s upbeat guidance for 2025, including a 20% net profit growth target and a 50% dividend hike, signals confidence in sustained momentum.

Company Overview: Waterdrop Inc

Founded in 2016, Waterdrop Inc operates two main online platforms—Waterdrop Insurance Marketplace and Medical Crowdfunding—offering a suite of insurance and healthcare services. The company is committed to leveraging digital innovation, particularly artificial intelligence, to drive customer acquisition, operational efficiency, and service quality.

Q2 2025 Results: Revenue and Earnings Outperform Estimates

Waterdrop’s Q2 2025 performance was marked by strong year-on-year (YoY) and quarter-on-quarter (QoQ) growth across key metrics.

Analysis and Strategic Insights: Growth Drivers and Segment Performance

• Accelerated Revenue Growth: Waterdrop’s Q2 top-line surged 23.9% YoY, catching up with its 20% annual growth target. First-year premium (FYP) soared 80.2% YoY, driven by a 95% increase in short-term insurance premiums and a 45.4% rebound in long-term FYP.
• Insurance Segment: Insurance revenue rose 28.7% YoY, reflecting strong sales, though the pace lagged FYP due to a higher share of short-term products and a lower take-rate.
• Crowdfunding and Others: These segments suffered slight declines in revenue, with crowdfunding down 2.7% YoY and others down 3.1%. However, digital clinical trial solution income rebounded, up 34.2% YoY.
• Operating Efficiency: The operating margin expanded 3.9 percentage points YoY to 11.6%, helped by AI-enabled customer acquisition and cost control. Losses in the crowdfunding segment deepened due to higher consultant team expenses.
• Net Profit Margin: Expanded by 3.7ppt YoY to 16.7%, although slower due to reduced interest income and forex losses, partially offset by tax benefits and minority interest reduction after the Shenlanbao acquisition.

AI Integration: Driving Sales, Productivity, and Cost Control

Waterdrop is making significant strides in AI adoption across its operations:

• AI Pro Model: Boosts sales conversions by 50%.
• Life Planner Copilot & KEYI AI: Enhance productivity among consultants and agents.
• 24/7 AI Pre-Sales Assistants: Improve customer engagement and service.

These innovations have directly contributed to strong FYP growth and margin expansion in the insurance segment.

Shareholder Returns: Dividends, Buybacks, and Cash Position

• Dividend Increase: Waterdrop declared a US\$0.03 per ADS dividend, up 50% YoY, equating to a payout ratio of 31.4% (vs. 30.8% in 2024).
• Share Buyback: A new US\$50 million buyback program was approved for the next 12 months.
• Cash Reserves: Waterdrop ended Q2 2025 with Rmb3.4 billion in cash, slightly down 3.9% QoQ due to forex losses but still maintaining strong operating cash flow and exploring M&A opportunities.

Management Guidance: Upgraded Outlook and International Ambitions

• 2025 Guidance: Management reaffirmed a 20% revenue growth target and upgraded net profit guidance to 20% growth, shifting from previous expectations of earnings decline.
• Distribution Investments: Increased spending is expected to further support revenue acceleration in 2H25, although take-rate pressure may persist due to a focus on short-term products.
• Overseas Expansion: Early-stage overseas activity includes Hong Kong operations and evaluations of other international markets to replicate the successful mainland model.

Valuation and Financial Metrics: Attractive Upside and Efficiency Gains

• Target Price: UOB Kay Hian maintains a BUY rating with a target price of US\$2.91, offering 63.4% upside from the current US\$1.78. The target implies 1.5x 2025F P/B and 16.8x 2025F PE.
• Trading Metrics: The stock currently trades at 0.9x 2025F P/B, close to historical averages.
• Catalysts: Strong results, upgraded guidance, and solid dividend payout are seen as key drivers for a valuation re-rating.

Balance Sheet and Cash Flow Highlights

• Total Assets (2025F): Rmb6,876 million
• Cash & Short-Term Investment (2025F): Rmb1,357 million
• Shareholders’ Equity (2025F): Rmb5,081 million
• Operating Cash Flow (2025F): Rmb254 million
• Net Cash Outflow (2025F): Rmb-150 million
• Debt to Equity (2025F): 1.2%

Major Shareholders and Stock Information

• Tencent: 23.0%
• Peng Shen: 22.2%
• Boyu Capital: 13.0%
• Shares Issued: 281.5 million
• Market Cap: US\$643.8 million
• 52-Week High/Low: US\$2.17 / US\$0.97

Conclusion: Waterdrop Inc Poised for Continued Outperformance

Waterdrop Inc’s Q2 2025 results highlight its rapid transformation into a high-growth, tech-enabled insurance leader. With robust financials, strategic AI investments, and a clear commitment to rewarding shareholders, the company is well-positioned to extend its winning streak. Management’s bullish guidance and exploration of new markets add further upside potential as Waterdrop continues to redefine the insurtech landscape. Investors seeking exposure to technology-driven insurance growth in China and beyond should keep Waterdrop firmly on their radar.