  noah holdings revised down its nongaap annual net profit forecast from a maximum of 155 billion yuan to a minimum of 1 billion yuan as it posted its third consecutive quarterly revenue drop   the company is expanding overseas and reducing the number of cities where it operates on the chinese mainland switching its focus to high net worth clients helped noah holdings ltd noah through a time of crisis but now that strategic shift is showing its downside in the current period of market turbulence recent market turmoil that saw hong kong’s benchmark hang seng index fall to a 14year low last month combined with pandemicrelated lockdown measures sent noah’s net profit down by 332 to 182 million yuan 255 million in this year’s third quarter according to the company’s latest quarterly report its second since making a second listing in hong kong to complement its older new york listing its nongaap net profit for the third quarter was down by a similar 328 to 191 million yuan as the company revised down its previous wholeyear nongaap profit forecast by up to 355 even as financial markets have shown signs of steadying in recent weeks the sagging profits came as noah reported its thirdquarter net revenue declined by 247 yearonyear to 685 million yuan its third consecutive quarterly decline its wealth management revenue fell by 287 yearonyear to 466 million yuan the worst performing part of its business but still accounting for twothirds of its revenue its asset management revenue fell by a milder 17 to 200 million yuan accounting for most of the rest the big drop in its wealth management business marked the third consecutive quarter of declines for that business reversing strong gains in last year’s fourth quarter so what’s causing the recent weakness noah mainly attributed it to its focus on rich clients since 2020 that shift has seen it provide investment products and valueadded services to chinese and overseas high net worth investors but severe market fluctuations during the third quarter made many more cautious which weighed on the company’s private securities and equities underwriting business as a result of raising less money for investment in private equity pe funds and insurance products its net revenues from onetime commissions plummeted by 525 and its net revenues from performancebased income and recurring service fees also fell by 521 and 216 respectively the company’s asset management business did a bit better banking on the expansion of its gopher asset management unit’s diverse investment portfolio in assets ranging from private equities and real estate to openmarket investment products and multiple currencies net revenue from recurring service fees for its asset management business bucked the trends by growing 41 yearonyear to 183 million yuan in the third quarter but a big drop in onetime commissions from the sales of private equity investment products caused the asset management business to post an overall revenue decline faced with the headwinds in the investment market the company has followed a practice of many others in china and started to tighten its belt and cut costs its employee compensation and benefits expenses fell by 288 to 343 million yuan and its sales and general expenses also declined its overall operating costs dropped by 334 to 453 million yuan such cost controls allowed the company to grow its operating profit by 13 to 232 million yuan in the third quarter despite the weakness in its core businesses its operating profit margin increased from 252 in the third quarter of 2021 to 339 in the latest quarter a gain of 87 percentage points cofounder and ceo wang jingbo said china’s strict implementation of its “zerocovid” policy and related lockdowns combined with china’s recent economic slowdown have prompted it to turn to a “dual circulation” business model of finding ways to mobilize resources both at home and abroad the company’s latest results show its revenue outside mainland china is growing growing from 216 of total revenue in the second quarter to 283 in the third as the company expands its overseas business the company’s business network in the chinese mainland covered 76 cities by the end of september down from 81 last year indicating it is adjusting its growth strategy in its home market as it expands overseas the company said it expects to see continued challenges for the rest of the year from a range of factors including the fed’s steady interest rate hikes china’s pandemicrelated controls and turbulence in the open market as a result it revised down its forecast for fullyear nongaap net profit from a previous range of 145 billion to 155 billion yuan to 1 billion to 11 billion yuan a downgrade of up to 355 using its nongaap net profit of 859 million yuan in the first three quarters and its latest fullyear forecast for that figure noah’s fourthquarter nongaap net profit should be somewhere between 141 million yuan and 241 million yuan in the fourth quarter that means the figure is unlikely to reach the more than 300 million yuan in nongaap net profit the company posted in the first two quarters of this year as the pandemic situation worsens on the chinese mainland lockdown measures are hampering its wealth management experts’ direct engagement with clients many of the biggest of those have sizable investment portfolios and require constant followup from noah’s strategists but not being able to meet with them facetoface due to covid restrictions can inhibit such existing relationships and also get in the way of signing up new clients noah’s new yorklisted shares fell by 17 the day after its announcement last week before rallying by 116 the next day the stock closed at 1467 on wednesday with a pricetoearnings pe ratio of 6 times much lower than the 247 times for charles schwab schw and 216 times of blackrock blk after being put on the us securities and exchange commission’s list of more than 100 chinese companies that could be forcibly delisted from new york for failing to comply with us law noah sought a second listing in hong kong in july it is currently in the process of upgrading its hong kong listing status to primary from the current secondary listing status