Jupai Holdings Limited (JP) CEO Jianda Ni on Q3 2021 Results - Earnings Call Transcript

Jupai Holdings Limited (JP) Q3 2021 Results Earnings Conference Call December 13, 2021 7:00 AM ET

Company Participants

Eddie Guo - Investor Relations

Jianda Ni - Chairman and Chief Executive Officer

Min Liu - Chief Financial Officer

Conference Call Participants

Yuhua Li - UBS

Operator

Thank you for standing for Jupai's Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks there will be a question-and-answer session.

Please note, today's conference call is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn to your host today's conference, Mr. Eddie Guo, Jupai's IR Director. Please go ahead.

Eddie Guo

Hello, everyone. And welcome to Jupai's earnings conference call for the third quarter and the 9 months ended September 30, 2021. Leading the call today is Mr. Jianda Ni, our Chairman and CEO, who will review the highlights for the third quarter of 2021 and the 9 months ended September 30, 2021. I will then discuss our financial results. We will then open the call to questions, at which time, our CFO, Ms. Min Liu, will also be available.

Before we continue, I refer you to our safe harbor statement in the earnings press release, which provides to this call as we will make forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB.

I will now turn the call over to Mr. Jianda Ni, our Chairman and CEO, and I will interpret his remarks for you.

Jianda Ni

[Foreign Language]

Eddie Guo

Thank you, Eddie. And welcome, everyone, to today's conference call.

Jianda Ni

[Foreign Language]

Eddie Guo

In the third quarter of 2021, the investment sentiment among high worth individuals remain stable as China's economy saw steady growth despite increasing challenges globally in the face of spreading damage.

Jupai remain committed to corporate transformation in accordance with industry trends and changes in the market environment and experienced continued improvement in business performance with net revenue growing 28.4% over the same period last year to RMB 109.3 million.

Jianda Ni

[Foreign Language]

Eddie Guo

From the prospective products, under the background of the rapid growth of direct financing market and the changes of the real sector and companies, Jupai has been focusing on product transformation and aims to reduce the proportion of our investment in the real estate sector, while continuing to make progress in the equity and secondary market products, mutual fund products and other net respective products.

Jianda Ni

[Foreign Language]

Eddie Guo

Jupai may make reasonable adjustments in its future structure in order to better adapt to changes in the capital market, better focus on the company's high quality assets and deepen our focus on wealth management.

We remain optimistic about the prospects for China's wealth management industry, and believe Jupai's capabilities strongly position us to seize opportunities and participate in the long-term development of the industry.

Jianda Ni

[Foreign Language]

Eddie Guo

I will now turn the call over to Eddie to go through the financial results for the third quarter and the 9 months ended September 30, 2021. Thank you.

Thank you, Ni. We are encouraged to see improved business performance and operational capabilities with net revenue growing 28.4% over the same period last year to RMB 109.3 million.

For the first 9 months of 2021, the aggregate value of wealth management products distributed was RMB 5.7 billion, a 7.0% increase from the same period in 2020. We will continue to improve our productivity, while optimizing overall client experience.

Now I will walk you through our financial highlights for the third quarter of 2021 and the 9 months ended September 30, 2021.

Net revenues for the third quarter of 2021 were RMB 109.3 million, a 28.4% increase from corresponding period in 2020, primarily due to increases in one-time commissions and recurring management fees.

Net revenue were RMB 288.6 million for the first 9 months of 2021, a decrease of 0.5% from the same period in 2020. Operating costs and expenses for the first - for the third quarter of 2021 were RMB 95.3 million, a decrease of 4.8% from the corresponding period in 2020. For the first 9 months of 2021, operating costs and expenses were RMB 271.0 million, a decrease of 18.2% from the same period in 2020.

Operating margin for the third quarter of 2021 was 12.8%, as compared to negative 17.6% for the corresponding period in 2020. For the first 9 months of 2021, operating margin was 6.1% compared to negative 14.2% for the same period in 2020.

Net loss attributable to ordinary shareholders for the third quarter of 2021 was RMB 33.4 million, as compared to RMB 3.0 million from the corresponding period in 2020. For the first 9 months of 2021, net loss attributable to ordinary shareholders was RMB 27.5 million, as compared to RMB 33.4 million from the same period in 2020.

Net loss attributable to ordinary shareholders per basic and diluted American deposit share for the third quarter of 2021 was RMB 1.01 and RMB 1.01 respectively, as compared to RMB 0.09 and RMB 0.09, respectively, from the corresponding period in 2020.

For the first 9 months of 2021, net loss attributable to ordinary shareholders per basic and diluted ADS was RMB 0.83 and RMB 0.83, respectively, as compared to RMB 1.00 and RMB 1.00, respectively, for the same period in 2020.

As of December 3rd, 2021, we have repurchased 1,088,076 ADSs as part of the company's share repurchase program of up to US$10 million announced in February 2020, at a total cost of US$1,347,579 inclusive of transaction charges and related fees.

That concludes our prepared remarks. I will now turn the call back to the operator to begin the Q&A session. Operator?

Question-and-Answer Session

Operator

Certainly. [Operator Instructions] We have a question coming from the line of Yuhua Li from UBS. Please go ahead.

Yuhua Li

Hi. Thank you for giving this opportunity to ask questions. I have two questions. The first is we see that Jupai's net revenue increased substantially over the same period last year. Can management share with us what factors contribute to this performance? And can you share more on product performance in this quarter?

And the second question is, what is the management's outlook for the future of the industry? Can you share with us some of the company's plans? Thanks.

Jianda Ni

[Foreign Language]

Eddie Guo

Thank you for your question. In the first half of 2021, China's overall economic development maintained a steady recovery trend. That said, going into the third quarter, we have seen increasing challenges in both China and abroad, as the global economic recovery slows in the face of spreading pandemic.

Despite the complex situation, China's third quarter GDP in 2021 increased by 4.9% over the same period last year. The main macro indicators remain within a reasonable range and the investment sentiment among high net worth individuals remained stable.

Jianda Ni

[Foreign Language]

Eddie Guo

In the current area [ph] of asset management, Jupai has continuously adjusted our business strategies and models in accordance with industry trends and changes in the market environment. We've been actively committed to transformation and to improving business performance.

In the third quarter, Jupai achieved net revenue of RMB 109.3 million, an increase of 28.4% over the same period last year, while further improving the incentive system for our wealth management advisor team, the average wealth management product value distributed per advisor has significantly increased.

Jupai's aggregate value of wealth management products distributed during the third quarter was RMB 1.9 billion and the amount with per capita increased to RMB 10.3 million.

Jianda Ni

[Foreign Language]

Eddie Guo

Recently, the company has been focusing on product transformation and aims to reduce the proportion of our investment in the real estate sector, while continuing to make progress in the equity and second market products, mutual fund products and other network asset products.

Jianda Ni

[Foreign Language]

Eddie Guo

In the third quarter, 6 listed issuers were underlying assets in Jupai's private equity funds, including 2 listed on the star market, 1 listed on Nasdaq, 2 listed on the second broad market and 1 listed on the Hong Kong exchange. Several more investee companies have obtained new financing and are making good progress.

Jianda Ni

[Foreign Language]

Eddie Guo

In terms of secondary market products, Jupai continued to strengthen our market research capabilities in order to provide better asset allocation products for investors, focusing on the development of standardized products, while further diversifying strategies for secondary market products and completing our comprehensive product line.

Jianda Ni

[Foreign Language]

Eddie Guo

Our asset transparent system strategy remains an important long-term goal. Jupai will continue to implement our transparency initiative throughout the product life cycle consisting of researching, leading funds, investment, management and withdrawal.

In addition, we also require selected co-operations or counterparties to meet regular transparency standards.

Jianda Ni

[Foreign Language]

Eddie Guo

As we regularly address risk our control standards, Jupai requires our entire professional team to participate in due diligence processes to deeply understand the dynamics and the future development of the selected industries, especially the management team of investment targets so as to better implant control measures over our products.

Jupai will continue to focus on improving the client experience in other analyzed products and services from the customer perspective through our pre-investment matching process, system upgrades and internal coordination.

Jianda Ni

[Foreign Language]

Eddie Guo

Now I will answer the second question. China's per capita GDP has surpassed $10,000 for two consecutive years. From a long-term perspective, the next decade will be an golden opportunity for the booming development of China's capital markets.

The shift in residence wealth investment will promote the in-depth development of the wealth management business industry. Mutual funds will also experience a period of rapid growth and industry prospects are expected to continue to improve. In line with industry trends and changes in the market environment, Jupai will seize more opportunities to improve business performance.

Jianda Ni

[Foreign Language]

Eddie Guo

China's real estate industry is faced with deleveraging requirements and the outbreak of liquidity crisis within certain players. Market sentiment has been cautious about real estate investments due to the concerns over the credit risk of real estate companies.

However, with the recent statements released by regulators, signaling from the Politburo to stabilize market expectations and the reserve ratio cut announced by the Central Bank that more easing is underway. China is set to continue supporting the commercial housing market to better meet buyers' reasonable housing needs and promote the healthy and sustainable development of the real estate industry.

On the basis of the sharp rebound in October, real estate loans in November continue to double on a year-on-year basis.

Jianda Ni

[Foreign Language]

Eddie Guo

Leveraging our advantages and experience in the wealth management industry, Jupai continue to throw on new opportunities, including the establishment of a discussed asset disposal fund as a reserve for high quality real estate investment targets.

To use our advantages in real estate data to carry out equity mergers and acquisitions of high quality assets and investment in previously issued overseas bonds by high quality real estate companies.

We believe that the financial characteristics of real estate will weaken in the future, while its manufacturing and service features strengthen, and we believe developers with small but sophisticated low debt models with low turnover will have more opportunities.

For the future development, Jupai will also focus on the real estate plus asset services such as industrial real estate, agriculture products market, senior focused real estate, and logistics.

Jianda Ni

[Foreign Language]

Eddie Guo

From the perspective of investment direction, Jupai will focus on the promising investment opportunities in carbon emissions, carbon neutrality, high technology, and new energy sectors under the incentive of government policies.

In terms of PE products, we will continue to focus on working with top institutions in the industry. At the same time, we will continue to collaborate with managers who we have worked well in the past with good returns.

Jianda Ni

[Foreign Language]

Eddie Guo

We are expecting more customized secondary market products based on China's recent economic developments with the gradual maturity of the capital markets and the attraction of earnings effect residence wealth is shifting from real estate and savings to equity markets with customers increasingly interested in re-allocating relevant assets.

Jianda Ni

[Foreign Language]

Eddie Guo

Jupai will explore new opportunities and face new challenges as China's wealth management industry realizes its enormous potential for further development in the new economic era.

As we implement our asset transparent system strategy to create a new benchmark for value in our industry, we are confident and capable to play an important role in the long-term development of Chinese wealth management industry. We will thrive to become one of the top wealth management and asset management brands for high net worth individuals in China.

Jianda Ni

[Foreign Language]

Eddie Guo

Thank you, Yuhua.

Yuhua Li

Thank you.

Operator

We are now approaching the end of the conference call. I will now turn the call over to Jupai's IR Director, Eddie Guo, for closing remarks. Please go ahead.

Eddie Guo

This concludes today's call. If you have any follow-up questions, please get in contact with us. Thank you.

Operator

Thank you for participating in today's conference. You may now disconnect. Good day.