20220711-招银国际-平安好医生-01833.HK-1H22E_preview__pandemic_hurt_topline_while_second-half_outlook_remains_solid_4页_961kb

PA Good Doctor (1833 HK) Company Update Summary

Core Content Overview

PA Good Doctor (PAGD) is a healthcare company in China that has experienced a temporary revenue decline due to the impact of the COVID-19 pandemic in major cities during the first half of 2022. Despite this short-term setback, the company's second-half outlook remains solid, with expectations of recovery and growth. The company has also been actively working on improving its gross margin by reducing low-margin transactions with Ping An Group and optimizing its product mix.

Main Points and Key Information

Revenue and Profit Outlook

• 1H22E Revenue Decline: Expected to decline by 27% YoY due to the pandemic's impact on offline customer acquisition.
• Full-Year Revenue Forecast: Revised to -12% YoY in 2022E (vs previous forecast of +6% YoY), with a net loss of RMB1,105mn (vs previous forecast of RMB1,193mn).
• 2023E and 2024E Outlook: Expected to show +23% YoY and +21% YoY revenue growth, respectively.
• Net Profit: Forecasted at RMB-1,105mn in 2022E, RMB-898mn in 2023E, and RMB-293mn in 2024E.

Strategic Shift

• Strategy 2.0: PAGD shifted its customer acquisition strategy from individual consumers to corporate clients in late 2021.
• Corporate Customer Focus: Targets mid- to large-sized SOEs and private companies, typically based in major Chinese cities.
• Offline Visits: Critical for corporate customer acquisition, but paused due to pandemic restrictions. Expected to resume fully after June 2022, signaling a recovery in business.

Gross Margin Improvement

• Gross Margin Target: Expected to improve by 3.4ppts to 26.7% in 2022E.
• Low-Margin Transactions: Reduced significantly from RMB2,708mn (2020) to RMB2,957mn (2021), which represented 39% / 40% of total revenue.
• Product Mix Optimization: Continued shift towards high-margin products.

Valuation and Target Price

• Target Price (TP): Maintained at HK$28.30, based on a 10-year DCF model with a WACC of 11.1% and terminal growth rate of 3.0%.
• Price Performance: Current price is HK$23.50, indicating a potential +20.44% upside to the TP.

Financial Highlights

• Earnings Summary:
  • FY20A Revenue: RMB6,866mn
  • FY21A Revenue: RMB7,334mn
  • FY22E Revenue: RMB6,463mn
  • FY23E Revenue: RMB7,973mn
  • FY24E Revenue: RMB9,662mn
• Net Profit:
  • FY20A: RMB-949mn
  • FY21A: RMB-1,539mn
  • FY22E: RMB-1,106mn
  • FY23E: RMB-898mn
  • FY24E: RMB-294mn

Shareholding and Stock Data

• Market Cap: HK$26,292mn
• Share Performance:
  • 1-month: +13.3%
  • 3-month: +6.1%
  • 6-month: -12.2%
• Shareholding Structure:
  • Ping An Insurance: 39.04%
  • Management: 8.54%
  • Sounda Properties: 9.37%
  • HSBC: 8.75%
  • Morgan Stanley: 7.09%
  • Other shareholders: 27.21%

Key Ratios

• Gross Margin:
  • FY20A: 27%
  • FY21A: 23%
  • FY22E: 27%
  • FY23E: 29%
  • FY24E: 32%
• Net Margin:
  • FY20A: -14%
  • FY21A: -21%
  • FY22E: -17%
  • FY23E: -11%
  • FY24E: -3%

Analyst Ratings

• CMBIGM Rating: BUY
• Potential Return: Over 15% over the next 12 months.

Conclusion

Despite the short-term impact of the pandemic on its revenue in 1H22E, PA Good Doctor is expected to recover and regain growth momentum in the second half of 2022. The company's strategic shift towards corporate clients and its focus on margin improvement through product mix optimization and reduced low-margin transactions are key drivers of its long-term growth prospects. The BUY rating is maintained, with a target price of HK$28.30, reflecting the company's potential for recovery and improved profitability.