20210204-招银国际-平安好医生-01833.HK-Emphasis_on_its_core_online_medical_service_capabilities_5页_1mb

PA Good Doctor (1833 HK) Company Update Summary

Core Content

PA Good Doctor, a leading player in China's online medical services sector, has demonstrated strong performance in 2020, with its topline growing by 35.5% YoY, exceeding the analyst's estimate of 28.1% YoY. The core online medical services segment was a major driver of this growth, recording a 82.4% YoY increase in revenue to RMB1.57bn, contributing 23% of total revenue. The net loss for 2020 was RMB948mn, better than the forecasted RMB1,020mn, while the adjusted net loss was RMB516mn, a 28.5% improvement over the previous year's RMB695mn.

Key Financial Highlights

• Revenue Growth:

  • FY19A: RMB5,065mn
  • FY20A: RMB6,866mn
  • FY21E: RMB9,348mn
  • FY22E: RMB12,929mn
  • FY23E: RMB18,029mn
  • YoY growth: 36% / 38% / 39% for FY21E, FY22E, and FY23E respectively.

• Net Loss Forecast:

  • FY21E: RMB1,261mn
  • FY22E: RMB1,016mn
  • FY23E: RMB730mn

• Earnings Per Share (EPS):

  • FY19A: RMB-0.73
  • FY20A: RMB-0.92
  • FY21E: RMB-1.10
  • FY22E: RMB-0.89
  • FY23E: RMB-0.64

• Price-to-Sales (P/S):

  • FY19A: 22.1x
  • FY20A: 16.3x
  • FY21E: 12.0x
  • FY22E: 8.7x
  • FY23E: 6.2x

• Target Price (TP): HK$142.77, up 28.16% from the previous TP of HK$142.10.

Strategic Initiatives and Capabilities

• Online Medical Services:

  • The segment recorded a 56.2% gross profit margin, up from 44.2% in 2019, contributing 47% of total gross profit.
  • Average daily consultations: 903,000, up 23.9% YoY.
  • In-house medical team: increased from 1,409 to 2,247.
  • Contracted external doctors: rose from 5,381 to 21,116.
  • Internet hospitals: the Company operates 50 co-constructed/self-built and has agreements with over 100 offline hospitals.

• User Growth:

  • Registered users: 372.8mn, up 18.3% YoY.
  • Monthly Active Users (MAU): 72.6mn, up 8.5% YoY.
  • Monthly Paying Users (MPU): 4mn, up 34.1% YoY.

• Monetization and Efficiency:

  • Average conversion rate of paying users: increased to 4.9%, up 0.9ppts YoY.
  • Paying healthcare users: 35.1% of total paying users.
  • Average daily prescriptions sold: up 88% YoY.
  • Gross margin: improved to 27.2%, up 4.1ppts YoY.

Investment Outlook

• CMBIS Rating: BUY, with a target price of HK$142.77.
• Growth Outlook: CMBIS expects consistent growth in the core online medical services segment, with a 10-year DCF model used to derive the target price.
• Catalysts:
  • Faster-than-expected user growth
  • Regulatory loosening for online medical services

Financial Performance Summary

Key Ratios

• Gross margin: increased from 23% to 34%.
• Net margin: decreased from -14% to -4%.
• ROE: improved from -7.4% to 8.3%.
• ROA: improved from -5.9% to 7.0%.
• Current ratio: remained strong, at 5x in FY21E.
• Net debt to total equity: Net cash in all years.

Valuation and Sensitivity Analysis

• DCF Valuation (RMB mn):

  • FY21E: -1,313
  • FY22E: -1,191
  • FY23E: -895
  • Terminal value: RMB298,683mn (based on 4.0% terminal growth rate and 9.3% WACC).

• Sensitivity Analysis:

  • The target price is sensitive to changes in WACC and terminal growth rate.
  • At a WACC of 9.3% and terminal growth rate of 4.0%, the target price is HK$142.77.

Peer Comparison

Shareholding Structure

• Ping An Insurance: 41.31%
• Employee: 19.26%
• Soft Bank: 4.42%
• Other shareholders: 35.01%

Analyst Certification and Disclaimers

• The analyst certifies that the views expressed in the report reflect personal views and are not influenced by compensation.
• No transactions were made in the stock covered in the report within 30 days prior to the report date.
• The report is not an offer or solicitation to buy/sell any security.
• CMBIS is not liable for any loss or damage incurred from reliance on the report.
• The report is based on publicly available information and may be subject to change.
• CMBIS may have investment banking relationships with the companies mentioned.

Conclusion

PA Good Doctor continues to strengthen its position in the online medical services industry through strategic investments in physician teams, platform upgrades, and expansion of internet hospitals. The company is expected to maintain its growth trajectory with a focus on monetization and efficiency, supported by a BUY rating and a target price of HK$142.77. The potential for regulatory support and user growth remains a key driver of its future performance.