20220908-招银国际-智云健康-09955.HK-Digitalizing_the_chronic_condition_management_market_in_China_45页_3mb

ClouDr (9955 HK) Summary

Core Content

ClouDr is a leading player in China's digital healthcare industry, specifically focusing on chronic condition management. The Company has developed a comprehensive digital platform that connects hospitals, pharmacies, and individual users to provide integrated solutions for managing chronic diseases such as cardiovascular diseases and diabetes. Its business model is scalable, with a strong emphasis on in-hospital SaaS solutions, which form the core of its operations.

Main Points

Market Potential

• China has the world's largest chronic condition patient population, with chronic conditions accounting for a significant portion of healthcare spending.
• In 2020, Chinese patients spent approximately RMB4.1tn on chronic condition management, 2x higher than the RMB2.1tn spent on the medical security fund.
• Chronic condition management is ideal for digital solutions due to the need for long-term care, recurring treatments, systematic data recording, and relatively low medical risk.

Business Model

• Hospital-first strategy: Focuses on building strong relationships with hospitals, which are central to the chronic condition management ecosystem.
• Three core business solutions:
  • In-hospital solution: Includes hospital SaaS, medical supplies, and digital marketing services for pharmaceutical companies.
  • Pharmacy solution: Offers pharmacy SaaS, medical supplies, and online consultation and prescription services.
  • Individual chronic condition management solution: Provides online consultation and prescriptions for individual users.

Market Position

• As of Jun 2022, ClouDr's hospital SaaS was installed in 2,490 hospitals, with a penetration rate of 6.4% for all hospitals and 11.9% for Class III & II public hospitals.
• Its pharmacy SaaS was installed in 185,731 stores, with a penetration rate of 28.5% as of 2021.
• ClouDr has over 26.5mn registered users on its individual platform and 95,000 registered doctors.

Financial Performance

• Revenue grew significantly from RMB524mn (2019) to RMB1,757mn (2021) and RMB1,380mn (1H22).
• YoY growth rates were 110% (2019–2020), 60% (2020–2021), and 95% (2021–1H22).
• Adjusted net profit is expected to turn positive in FY24E, with a forecasted CAGR of 52% for revenue from 2022 to 2024.
• Target Price (TP): HK$31.43, based on a 10-year DCF model (WACC: 10.0%, terminal growth: 3.0%).

Competitive Advantages

• Pioneer and market leader: ClouDr is the largest digital chronic condition management solution provider in China in terms of SaaS installations.
• Innovative business model: Combines SaaS with medical supplies and digital marketing, creating a sticky relationship with hospitals and pharmaceutical companies.
• Strong product capabilities: Proprietary AloT devices and a comprehensive medical knowledge library support its digital services.
• Doctor-patient relationships: The Company has built strong relationships with both doctors and patients, enabling targeted and effective service delivery.
• Visionary management team: Led by Mr. Kuang, who founded the company in 2014 with a mission to improve chronic condition management for Chinese families.

Key Information

• Target Price (TP): HK$31.43, with a potential upside of 103.0% from the current price of HK$15.48.
• Investment Thesis: Initiate at BUY, driven by the growing digitalization of the healthcare industry in China and the Company's leading position in the market.
• Investment Risks:
  • Early stage of business expansion and monetization.
  • Uncertainty around breakeven time.
  • Evolving legal and regulatory requirements.
  • Product pricing subject to Chinese regulations.

Financial Highlights

Strategic Positioning

• In-hospital solution: Focuses on improving efficiency and effectiveness of chronic condition management in hospitals.
• Pharmacy solution: Provides supply chain management and online consultation/prescription services.
• Individual solution: Offers a platform for patients to access continuous care and prescriptions outside of hospitals.

Key Trends and Challenges in the Market

Trends

• Digitalization: Accelerated by the COVID-19 pandemic, increasing acceptance of online healthcare services.
• Integration of in-hospital and out-of-hospital services: Hospitals and patients increasingly rely on digital platforms to manage chronic conditions.
• Prescription outflow: Recent policies promote the accessibility of prescription drugs outside hospitals.

Challenges

• Low digitalization: Manual operations dominate in-hospital services, limiting automated data management.
• Uneven medical resource distribution: High-quality medical resources are concentrated in large hospitals.
• Limited insurance coverage: Out-of-pocket spending accounts for 45.6% of chronic condition healthcare costs in 2020.

Conclusion

ClouDr is well-positioned to capitalize on the growing digital chronic condition management market in China. With a strong foothold in hospitals and pharmacies, a scalable business model, and a focus on long-term patient care, the Company is expected to deliver strong financial performance in the coming years. Its innovative approach and proven effectiveness in clinical settings further reinforce its competitive edge.