Q3 2024 Earnings Summary
- International expansion is becoming more dominant, with more resources and expansion efforts going into international markets, particularly in accumulation of U.S. dollar-denominated investment opportunities, which is expected to drive future growth.
- Increased client engagement is providing Noah with opportunities to offer more asset allocation advice and drive more client transactions, potentially leading to improved future financial performance.
- Enhanced product offerings on the RMB side to meet increasing client interest in domestic markets, while still advising clients on global investment strategies, could lead to increased revenue and profitability.
- Domestic Revenue Under Pressure with Uncertain Recovery: The company acknowledged that domestic revenue has been under pressure and it's too early to say that revenue growth trend has come into a turning point. The CFO mentioned that the market has been changing drastically, and while they hope to accelerate transformation, they need to remain patient. This suggests that the domestic business may continue to face challenges, potentially impacting overall revenue growth.
- Ongoing Transition May Impact Efficiency and Financial Performance: The company is still undergoing a transition period to a new sales model and is trying to work out the best way to improve efficiency. Executives admitted that it has been a few quarters, and they are still figuring out the new sales model. This could lead to operational uncertainties and affect future financial performance.
- Conservative Approach May Lead to Missed Opportunities in Domestic Market: Despite improved client sentiment and a rebound in trading activities and interest among mainland China clients, the company has not changed its CIO house view and continues to advise clients to invest in global beta returns. This conservative stance might result in missing out on near-term opportunities in the domestic A-share market, potentially affecting the company's competitiveness in capturing market share.
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Revenue Outlook
Q: Is NOAH's revenue trend improving, and what will drive it?
A: Management feels it's too early to say if revenue growth has turned a corner due to drastic market changes. They note that growth is shifting, with more resources going into international expansion. They expect U.S. dollar-denominated investments to become more dominant and aim to accelerate transformation without deviating from their overall strategy. -
Client Behavior and Products
Q: Have client behaviors changed after China's stimulus, and will Q4 revenue improve?
A: Clients are increasingly willing to engage, providing opportunities to offer long-term asset allocation advice. NOAH focuses on three areas: providing a safety net with global protection and inheritance tools; cash management portfolios for liquidity and inflation protection; and pursuing growth via private equity, venture capital, and AI investments. They are optimizing a new sales model, which they believe will reflect in future financial performance. -
Equity Market Participation
Q: How does NOAH participate in rising equity sentiment, and impact on revenue?
A: Third-quarter results were largely not impacted by recent policy changes or the stock market rebound. Client sentiment is improving, with increased activity among mainland China clients. NOAH maintains a long-term view, advising clients to use RMB assets to invest in global beta returns. They've enhanced RMB product offerings but continue to advocate investing globally through QDII and QDLP products.
Research analysts covering NOAH HOLDINGS.