20230223-招银国际-叮当健康-09886.HK-2022_preview__Continuing_to_enhance_longterm_growth_logic_5页_1021kb

Dingdang Health (9886 HK) 2022 Preview Summary

Core Content Overview

Dingdang Health is a company operating in the Chinese retail pharmacy sector, focusing on online medicine sales and store expansion. The report provides a forecast for its financial performance and valuation from 2022 to 2024, along with an analysis of its growth drivers and profitability outlook.

Main Points and Key Information

Revenue Growth Forecast

• 2022E: Expected revenue growth of +24% YoY, reaching RMB4,571 million.
• 2023E: Revenue growth is forecasted to rise to +28.5% YoY, reaching RMB5,874 million.
• 2024E: Revenue growth is expected to be +27.5% YoY, reaching RMB7,488 million.

Profitability Outlook

• 2022E: Adjusted net loss of RMB192 million.
• 2023E: Adjusted net loss of RMB94 million.
• 2024E: Adjusted net profit of RMB29 million.
• Gross Margin: Expected to improve to 33.3% in 2024E, up from 33.2% in 2022E.
• Operating Margin: Improved from -9.3% in 2022E to -0.5% in 2024E.
• Adjusted Net Profit Margin: Expected to reach 0.38% in 2024E, up from -4.2% in 2022E.

Impact of External Factors

• 2022E: Revenue growth was impacted by COVID-19 restrictions, particularly on new store openings and sales of "four-type medicines".
• Store Addition: In 1H22, the company added only 8 new stores, compared to 100 in 2021.
• Post-pandemic Recovery: Expected to resume store expansion in 2H22E, with revenue and margin improvements anticipated in 2023E due to relaxation of travel restrictions and sales of "four-type medicines".

Strategic Initiatives

• Online Stores: Launched online stores on Douyin, a platform to increase public attention and diversify traffic channels.
• Cost Optimization: Continuous cost savings in fulfillment, marketing, and admin expenses have contributed to GPM improvement.

Valuation and Investment Recommendation

• Target Price: HK$14.57, based on a 10-year DCF model with a WACC of 9.7% and terminal growth rate of 3.0%.
• Current Price: HK$9.18, indicating a potential upside of 58.8%.
• Investment Recommendation: Maintain BUY, reflecting positive long-term growth prospects and strong O2O medicine sales competency.

Financial Highlights

Earnings Summary

P/S Ratio

Shareholding Structure

Stock Data

Analyst Notes

• Maintain BUY recommendation due to strong O2O competency and positive long-term growth outlook.
• Valuation: Based on risk-adjusted DCF model with terminal value of RMB33,310 million.
• Key Assumptions: Post-pandemic recovery, increased online medicine purchasing, and cost optimization.

Summary of Key Financial Metrics

• Revenue Growth: Expected to stabilize and accelerate from 2023E onward.
• Margin Improvements: GPM is improving, and operating margin is expected to turn positive by 2024E.
• Cost Efficiency: Fulfillment, marketing, and admin expenses are declining, contributing to profitability improvements.
• Online Expansion: The Douyin initiative is expected to enhance brand visibility and traffic acquisition.
• Valuation: The target price is based on a 10-year DCF model, indicating potential for significant returns.

Analyst Certifications and Disclosures

• Analyst Certification: The analyst certifies that the views expressed are personal and not influenced by compensation.
• Conflict of Interest: CMBIGM may have investment banking relationships with the companies discussed, which could affect report objectivity.
• Disclaimer: The report is not investment advice, and actual outcomes may differ from forecasts. Risks are involved in trading securities.

Conclusion

Dingdang Health is expected to recover from pandemic-related challenges and achieve profitability by 2024E, driven by post-pandemic business resumption, online medicine growth, and cost optimization. The BUY recommendation reflects confidence in its long-term growth potential and improving financial metrics.