20230330-招银国际-叮当健康-09886.HK-Long-term_growth_outlook_remains_intact_5页_1mb

Dingdang Health (9886 HK) Summary

Core Content

Dingdang Health, listed on the Hong Kong Stock Exchange, reported its 2022 financial results, showing improved performance despite challenges from the pandemic. The company's long-term growth outlook remains intact, with expectations of continued revenue growth and margin improvements.

Main Points

• Revenue Growth:
  • Dingdang's revenue for 2022 was RMB4,329 million, a 17.7% increase YoY.
  • Revenue is expected to grow at 23.3% in 2023E, 21.4% in 2024E, and 20.5% in 2025E.
• Margin Improvements:
  • Adjusted non-IFRS net loss in 2022 was RMB129 million, a 60.9% improvement YoY.
  • Adjusted net profit is forecasted to turn positive in 2024E and reach RMB86 million in 2025E.
• Business Development:
  • The company extended its smart pharmacy network to 19 major cities in China by the end of 2022.
  • It connected 70 additional pharmacies with national medical security, increasing the total to 169.
  • Over 8 million online health consultations were provided in 2022, enhancing online traffic conversion.
• User Growth:
  • The number of registered users on the self-owned platform increased from 33.0 million in 2021 to 37.5 million in 2022.
• Stock Performance:
  • The target price was reduced to HK$7.65 from HK$14.57, reflecting lower revenue projections.
  • The current price is HK$3.79, with a 102.0% upside to the target price.
• Analyst Recommendations:
  • The analyst maintains a BUY rating, citing sustainable business recovery and margin improvements.

Key Information

• Gross Profit Margin: Improved by 1.9ppt in 2022 to 32.7%, with further expected increases.
• Fulfillment Expense Ratio: Decreased by 0.9ppt to 10.3% in FY22.
• Selling & Marketing Expense Ratio: Shrunk by 1.7ppt to 21.0% in FY22.
• Online Sales Growth: Expected to continue due to growing penetration of online medicine purchasing in China.
• Business Recovery: Expected in 2023E with the resumption of sales of "four-type medicines" post-pandemic.
• Financial Metrics:
  • Revenue (RMB mn): 3,679 (FY21A), 4,329 (FY22A), 5,336 (FY23E), 6,477 (FY24E), 7,804 (FY25E)
  • Adjusted Net Profit (RMB mn): -329 (FY21A), -129 (FY22A), -99 (FY23E), 33 (FY24E), 86 (FY25E)
  • EPS (Adjusted): -0.15 (FY22A), -0.07 (FY23E), 0.02 (FY24E), 0.06 (FY25E)
  • P/S (x): 1.0 (FY22A), 0.8 (FY23E), 0.7 (FY24E), 0.6 (FY25E)

Shareholding and Stock Data

• Market Cap (HK$ mn): 5,084.2
• Average 3 Months Turnover (HK$ mn): 9.2
• Total Issued Shares (mn): 1,341.5
• Shareholding Structure:
  • Wenlong Yang: 49.2%
  • China Merchants Bank: 7.1%

Analyst Disclosures

• The research analyst certifies that the views expressed reflect personal opinions and are not influenced by compensation.
• The analyst confirms no trading activity in the stock within 30 days prior to the report and no intent to trade within 3 business days after.
• CMBIGM has investment banking relationships with the issuers covered in the report.

Valuation and DCF Model

• DCF Valuation (RMB mn): 8,729 (Equity Value)
• Terminal Growth Rate: 3.0%
• WACC: 10.0%
• Target Debt to Asset Ratio: 35.0%

CMBIGM Ratings

• BUY: Stock with potential return of over 15% over next 12 months
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark over next 12 months
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark over next 12 months

Important Disclosures

• There are risks involved in transacting in any securities.
• The information in this report is not suitable for all investors.
• CMBIGM does not provide individually tailored investment advice.
• The report is not an offer or solicitation to buy or sell any security.
• CMBIGM may have investment banking relationships with the companies mentioned, which could lead to conflicts of interest.

Conclusion

Dingdang Health is expected to benefit from the post-pandemic recovery and the growing trend of online medicine purchasing in China. The company has shown margin improvements and business expansion, which support its long-term growth prospects. The analyst maintains a BUY rating, despite a reduction in target price, due to the company's sustainable recovery and margin enhancement potential. Investors are advised to consult with a professional financial advisor before making any investment decisions.