Noah Holdings: Q2 Results Miss And New Buyback Plan Draw Attention

Core Viewpoint - Noah Holdings Limited's Q2 2024 results were disappointing, missing consensus estimates, but the company has announced a new share buyback program that could enhance shareholder yield to a mid-teens percentage range [1][7]. Financial Performance - Noah Holdings reported Q2 2024 revenue of RMB 615.8 million and a net profit of RMB 99.8 million, which were -4% and -17% below consensus estimates of RMB 642.0 million and RMB 120.0 million, respectively [3]. - Year-over-year, the company's revenue and net income fell by -35% and -68%, respectively [3]. - Revenue from Mainland China and international operations dropped by -39% YoY and -29% YoY, amounting to RMB 337.2 million and RMB 278.6 million, respectively [3]. Business Challenges - The company has temporarily suspended the distribution of domestic insurance products due to concerns over the underlying asset quality of insurance firms in Mainland China [3]. - The slowdown in revenue from global insurance products is attributed to a competitive market environment [3]. - Management indicated that both domestic and international businesses are facing challenges from a shift away from riskier insurance offerings and increased competition [3]. Cost Management - Noah Holdings implemented cost control measures, including streamlining its branch network, resulting in a -19% decline in total operating expenses [4]. - Despite these measures, the decline in revenue led to a contraction in operating profit margin and net margin by -15.3 percentage points and -16.4 percentage points YoY, respectively [4]. Share Buyback Program - The company announced a two-year $50 million share buyback plan, which is expected to enhance return on equity (ROE) and capital allocation efficiency [5][6]. - Noah Holdings is currently trading at a low trailing price-to-book (P/B) multiple of 0.35 times, with a recent ROE of 10.3%, lower than its historical average of 14.2% [6]. - The potential annualized buyback yield could reach 5%, and adjusted forward dividend yields for FY 2024 and FY 2025 are estimated to be in the range of 9.0%-9.5% [6]. Conclusion - While Noah Holdings' Q2 2024 results were below expectations and a quick turnaround seems unlikely, the new share buyback program could provide an attractive shareholder yield in the mid-teens percentage range [7].