HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

JD Health International  / Equity Bottom-Up

<ul>
<li>It is an indisputable fact that JD Health's revenue growth has slowed down. The core reason is the industry beta brought by mobile Internet demographic dividend/COVID-19 dividend has faded away.</li>
<li>JD Health's performance could be under pressure in 2H23. If revenue growth continues to show a downward trend, whether the current profit margin/profitability can be maintained is a question mark.</li>
<li>JD health is facing four major dilemmas, including both business and policy aspects. Long-term valuation outlook for JD Health is not optimistic. We advise investors to re-evaluate the Company. </li>
</ul>


It is an indisputable fact that JD Health's revenue growth has slowed down. The core reason is the industry beta brought by mobile Internet demographic dividend/COVID-19 dividend has faded away.
JD Health's performance could be under pressure in 2H23. If revenue growth continues to show a downward trend, whether the current profit margin/profitability can be maintained is a question mark.
JD health is facing four major dilemmas, including both business and policy aspects. Long-term valuation outlook for JD Health is not optimistic. We advise investors to re-evaluate the Company. 


JD Health (6618.HK) 23H1 - The Beautiful Story Is Over; It's Time to Face Reality

China/Asia TMT, Blue Lotus Research Institute

Shawn Yang

China/Asia TMT

China TMT research

Blue Lotus Research Institute

​​​​​​​​Blue Lotus is a China headquartered research institution covering overseas listed China TMT stocks. 

<ul>
<li>JDHealth (JDH) reported C1H23 top line, non-IFRS operating profit and IFRS net income 9.3%, 17% and 162% above our estimates. </li>
<li>We believe that with years of tightening NDRL and the recent hardline anti-corruption campaign, </li>
<li>More and more pharmaceuticals and patients are looking for alternative channels, which bodes well for JDH in the long run; We raise TP from HK$57 to HK$65 and reiterate BUY</li>
</ul>


JDHealth (JDH) reported C1H23 top line, non-IFRS operating profit and IFRS net income 9.3%, 17% and 162% above our estimates. 
We believe that with years of tightening NDRL and the recent hardline anti-corruption campaign, 
More and more pharmaceuticals and patients are looking for alternative channels, which bodes well for JDH in the long run; We raise TP from HK$57 to HK$65 and reiterate BUY


[JD Health (6618 HK, BUY, TP HK$65) TP Change]: Benefit of Alternative Channel Starts to Show

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<ul>
<li>JD Health reported 1H2023 results yesterday. 1H revenue increased 34.0% YoY to RMB27.1bn (vs consensus RMB27.5bn) and reported an OP of RMB943.9m (vs consensus RMB753.2m) vs RMB60.1m in 1H2022.</li>
<li>Though the company made OPM of 5.7% in 1Q2023, 1H2023 OPM was 3.5% in line with our analysis that OPM in excess of 2-3% may not be possible in LT.</li>
<li>There is very little upside for GPM to improve unless the company’s high-margin service business takes off at a higher rate which seems unrealistic to us.</li>
</ul>


JD Health reported 1H2023 results yesterday. 1H revenue increased 34.0% YoY to RMB27.1bn (vs consensus RMB27.5bn) and reported an OP of RMB943.9m (vs consensus RMB753.2m) vs RMB60.1m in 1H2022.
Though the company made OPM of 5.7% in 1Q2023, 1H2023 OPM was 3.5% in line with our analysis that OPM in excess of 2-3% may not be possible in LT.
There is very little upside for GPM to improve unless the company’s high-margin service business takes off at a higher rate which seems unrealistic to us.


JD Health 1H2023: Reports Operating Profits; Margin Upside Is Very Limited

<ul>
<li>In May, JD Health made a voluntary announcement that the company has made operating income of RMB795.4m (5.7% of revenues) in 1Q2023 vs RMB61.6m (0.7% of revenues) reported in 1Q2022.</li>
<li>JD Health’s share price been down more than 25% despite the company announcing strong 1Q2023 results, as the market has become concerned over the company’s ability to sustain its profits.</li>
<li>Our quantamental analysis proves that JD Health may not be able to generate OPM in excess of 2-3% as there is very little room for GPM to improve.</li>
</ul>


In May, JD Health made a voluntary announcement that the company has made operating income of RMB795.4m (5.7% of revenues) in 1Q2023 vs RMB61.6m (0.7% of revenues) reported in 1Q2022.
JD Health’s share price been down more than 25% despite the company announcing strong 1Q2023 results, as the market has become concerned over the company’s ability to sustain its profits.
Our quantamental analysis proves that JD Health may not be able to generate OPM in excess of 2-3% as there is very little room for GPM to improve.


JD Health: Profitability Remains Under Pressure

<ul>
<li>The previously stockpiled drugs/medical devices require a long cycle of digestion. As the industry beta brought by COVID-19 dividend would fade away, JD Health's performance growth could slow down accordingly.</li>
<li>Although JD Health divides its buiness into product revenue and service revenue, drug/product sales are still the underlying logic and business model, which is difficult to maintain high growth expectations.</li>
<li>Current valuation is in reasonable range. Since JD Health will be added to HSI INDEX, it could help boost share price. However, if business transformation fails, high valuation is unsustainable. </li>
</ul>


The previously stockpiled drugs/medical devices require a long cycle of digestion. As the industry beta brought by COVID-19 dividend would fade away, JD Health's performance growth could slow down accordingly.
Although JD Health divides its buiness into product revenue and service revenue, drug/product sales are still the underlying logic and business model, which is difficult to maintain high growth expectations.
Current valuation is in reasonable range. Since JD Health will be added to HSI INDEX, it could help boost share price. However, if business transformation fails, high valuation is unsustainable. 


JD Health (6618.HK) 23Q1 - As Industry Beta Fades, the Expectation Reversal Has yet to Come

China

JD Health International Inc. operates drug stores. The Company retails Chinese and Western medicines, nutrition products, health care products, and other products. JD Health International markets its products throughout China.

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JD Health International (6618 HK)

JD Health (6618.HK) 23H1 - The Beautiful Story Is Over; It's Time to Face Reality

We had anticipated JD Health's declining growth in previous insights, but 23Q2 performance was indeed ugly. JD Health's facing dilemmas in policies...

Xinyao (Criss) Wang

[JD Health (6618 HK, BUY, TP HK$65) TP Change]: Benefit of Alternative Channel Starts to Show

With years of tightening NDRL and the recent hardline anti-corruption campaign, more pharmaceuticals and patients are looking for alternative...

Blue Lotus Research Institute

JD Health 1H2023: Reports Operating Profits; Margin Upside Is Very Limited

Though JD Health made an OPM of 5.7% in 1Q2023, 1H2023 OPM was 3.5% in line with our analysis that OPM in excess of 2-3% may not be possible in the...

Shifara Samsudeen, ACMA, CGMA

JD Health: Profitability Remains Under Pressure

JD Health reported an OPM of 5.7% for 1Q2023. Our quantamental analysis proves that this is one off and may not be able to generate OPM in excess...

Shifara Samsudeen, ACMA, CGMA

JD Health (6618.HK) 23Q1 - As Industry Beta Fades, the Expectation Reversal Has yet to Come

As industry beta brought by COVID-19 dividend fades away, JD Health's performance growth would slow down.The current business model cannot support...

Xinyao (Criss) Wang

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)